The fall of $11.68 billion comes as the central bank intervened heavily in currency markets, selling dollars to support the rupee amid pressure linked to the ongoing Iran conflict and rising global oil prices. Analysts also pointed to stronger US bond yields and a firmer dollar as factors that weighed on the reserves during the period.
Gaura Sen Gupta, economist at IDFC FIRST Bank, estimated that the decline reflected a mix of central bank intervention and valuation changes in reserve assets. “The RBI sterilised the liquidity impact of the dollar sales through on-screen bond purchases,” she told Reuters.
According to her estimates, the reserves drop included net dollar sales of about $6.1 billion by the RBI, along with valuation losses of roughly $5.4 billion.
Most of the decline came from foreign currency assets, which fell by $9.8 billion during the week. The value of gold reserves also decreased by $1.6 billion.
Foreign currency assets, which form the largest component of India’s reserves, are expressed in US dollar terms and reflect the impact of fluctuations in the value of other currencies held by the central bank.
India’s foreign exchange reserves also include the country’s Special Drawing Rights (SDRs) and its Reserve Tranche Position with the International Monetary Fund.As per RBI data, foreign currency assets stood at $563.25 billion during the week ended March 6, while gold reserves were valued at $130.02 billion. SDRs were recorded at $18.72 billion, and the Reserve Tranche Position at $4.83 billion, bringing the total reserves to $716.81 billion.
The previous week’s figures showed foreign currency assets at $573.13 billion, gold reserves at $131.63 billion, SDRs at $18.87 billion, and the Reserve Tranche Position at $4.87 billion, with total reserves at $728.49 billion.