India's forex reserves breach $500 billion mark for first time

The country's foreign exchange reserves crossed the $500 billion mark for the first time in the week ended June 5. As per the data released by the Reserve Bank of India (RBI) on Friday, the reserves, which are being considered as one of the biggest assets in the fight against challenges posed by the COVID-19 pandemic, surged $8.22 billion in a week to hit a fresh lifetime high of $501.7 billion.

In the week ended June 5, foreign currency assets (FCA), a major component of the overall reserves, climbed by $8.42 billion to $463.63 billion.

In the week ended May 29, the reserves had increased by $3.43 billion to a record high of $493.48 billion.

Expressed in dollar terms, the foreign currency assets include the effect of appreciation or depreciation of non-US units like the euro, pound and yen held in the foreign exchange reserves.

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The gold reserves, however, declined by $329 million to $32.35 billion during the week under review.

Meanwhile, India's special drawing rights with the International Monetary Fund rose by $10 million to $1.44 billion, while the country's reserve position with the IMF also increased by $120 million to $4.28 billion, the data showed.

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The objective of foreign exchange reserve management is to maintain healthy economy by ensuring adequate liquidity in the system. It acts as the first line of defense in case of economic crisis to support the imports. Foreign exchange reserves facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India.

By Chitranjan Kumar