India’s forex reserves hit record $729.3 billion
Dollar inflows surged after central bank measures to attract overseas capital and support the rupee.
India’s foreign-exchange reserves rose to a record $729.3 billion in the week of Aug. 21 as dollar inflows surged after measures by the Reserve Bank of India, Bloomberg reported.
The stockpile increased by $12.4 billion, surpassing the previous record of $728.5 billion reached in February, according to RBI data.
Measures introduced in June, including a special deposit program for overseas citizens, attracted $72.8 billion through Aug. 21. The inflows have helped India avoid a third consecutive annual deficit in its broadest measure of capital flows.
The reserves give the RBI more capacity to support the rupee, which has recovered about 1.7% from a record low in May but remains under pressure from high oil prices and India’s dependence on fuel imports.
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The program is costly because the RBI covers banks’ hedging expenses, allowing lenders to offer higher interest rates to overseas customers. An analyst estimated the carry cost could reach about $5.7 billion a year.
The RBI brought forward the closure of the diaspora deposit program earlier this month after Governor Sanjay Malhotra said inflows were stronger than expected.