India’s foreign exchange reserves witnessed a decline of $2.6 billion, bringing the total down to $682.13 billion as of 1 November 2024, as revealed by the latest figures from the Reserve Bank of India (RBI) . This follows a previous $3.4-billion drop, which reduced the reserves to $684.8 billion as of 25 October.
Key Contributors to the Dip
The primary driver behind this decrease was a substantial reduction in foreign currency assets (FCAs), which fell by $3.9 billion to $589.84 billion. This decline was partially offset by a $1.2-billion rise in India’s gold reserves, which now stand at $69.75 billion.
Other components of India’s foreign exchange portfolio saw minor changes. Special Drawing Rights (SDRs) dropped by $1 million to $18.21 billion, while the nation’s reserve position in the International Monetary Fund (IMF) increased slightly by $4 million, reaching $4.3 billion.
RBI Expands Forex Reporting Protocols
In an effort to bolster transparency and ensure comprehensive data reporting, the RBI has announced an expansion of its reporting protocols for foreign exchange transactions. These new measures will require authorised dealers to report spot foreign exchange transactions, including cash value and TOM (tomorrow) deals, to the Clearing Corporation of India’s trade repository. TOM deals refer to currency exchanges that occur on the business day following the current one.
Currently, only over-the-counter (OTC) foreign exchange derivatives and foreign currency interest rate derivative contracts must be reported. The new directive, which will take effect on 10 February 2025, mandates reporting for all inter-bank foreign exchange contracts involving the rupee or other currencies. Money-changing transactions remain outside the scope of this regulation.
The RBI has underscored that authorised dealers will be responsible for the accuracy of reported transactions. Overseas counterparties will not be required to report or validate these transactions, alleviating the need for matching confirmations.
Strengthening Market Transparency
This initiative aligns with the RBI’s strategic efforts to enhance the transparency of the foreign exchange market, contribute to financial stability, and elevate market efficiency. By expanding reporting requirements, the RBI aims to ensure a more comprehensive representation of India’s foreign exchange dealings.
India’s Position in Global Forex Reserves
India maintains its position as one of the world’s largest holders of foreign exchange reserves, ranking fourth globally, trailing only China, Japan, and Switzerland. The nation’s forex journey from being part of the ‘Fragile Five’ to emerging as the fastest-growing major economy serves as a beacon for other developing countries.
In September 2024, India achieved a milestone when its foreign exchange reserves exceeded the $ 700 billion mark for the first time, further underscoring its rising economic strength and establishing its status as the world’s fifth-largest economy.
