The forex kitty had risen handsomely in the previous two reporting weeks, and rose by USD 5.977 billion to USD 578.778 billion for the week ended March 24.
For FY23, the overall kitty has dropped by USD 28.86 billion.
It can be noted that in October 2021, the country’s forex kitty had reached an all-time high of USD 645 billion.
The reserves have been declining as the central bank deploys the kitty to defend the rupee amid pressures caused majorly by global developments.
For the week ended March 31, the foreign currency assets, a major component of the reserves, decreased by USD 36 million to USD 509.691 billion, according to the Weekly Statistical Supplement released by the Reserve Bank of India (RBI) on Friday.
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.Gold reserves decreased by USD 279 million to USD 45.20 billion, the RBI said.
The Special Drawing Rights (SDRs) were down by USD 27 million to USD 18.392 billion, the apex bank said.
The country’s reserve position with the IMF was up by USD 14 million to USD 5.165 billion in the reporting week, the apex bank data showed.
The central bank intervenes in the spot and forwards markets to prevent runaway moves in the rupee which affects the overall reserves position while changes also stem from valuation gains or losses.
The rupee finished at 81.8850 per dollar on Thursday, compared with its previous close of 82.
The currency recovered from a small dip to 82.0525 immediately after the RBI held its key repo rate at 6.50%, citing risks to growth amid the recent global financial turmoil.
Most analysts had expected a seventh straight and final rate hike, of 25 basis points (bps), at this meeting.
“We see this as a temporary setback for the rupee,” Standard Chartered analysts said in a note.
“Given the improvement in India’s trade balance and broad dollar weakness, we see rising downside risks to USD/INR in the near term.”
The dollar index is trading near two-month lows on expectations that the Federal Reserve is near the end of its monetary tightening campaign after a batch of soft data.
However, the Indian central bank did keep its stance at “withdrawal of accommodation” to remain cautious in the face of elevated core inflation. Governor Shaktikanta Das said the pause was “for this meeting only”.
Das also stressed on maintaining the rupee’s stability and announced a measure to deepen forex markets by proposing to permit banks with IFSC banking units to offer non-deliverable derivative contracts involving the rupee to resident users in the onshore market.
(With agency inputs)