India’s forex reserves fall to 20-month low, now $572.7 billion

India’s foreign exchange reserves fell by another $7.54 billion to $572.71 billion, the lowest in over 20 months, for the week ended July 15, according to the central bank latest data.

The forex reserve fell to 20 months low following heavy intervention by the central bank in the forex market as it continued to sell greenback to prevent a sharp depreciation of the rupee, according to Indian media reports.  

On July 22, RBI governor Shaktikanta Das said that the central bank has zero tolerance for bumpy movements in the rupee and assured that India’s forex reserves are adequate. 

“In recognition of the fact that there is a genuine shortfall of supply of forex in the market relative to demand because of import and debt servicing requirements and portfolio outflows, the RBI has been supplying dollars to the market to ensure that there is adequate forex liquidity," The Times of India reported quoting governor Shaktikanta Das as saying. 

 The RBI chief’s remarks came at a time the rupee has been touching new record lows against the dollar in the last few sessions. The value of the rupee has depreciated by around 7 percent since January.

Experts said the recent rupee weakness is caused by strong dollar demand from oil importers due to high crude oil prices.

The India rupee closed 10 paisa stronger at 79.85 as against Thursday’s close of 79.95, according to the India media. 

The forex reserves were last at 572 billion in November 2020. Since then, the reserves had risen to a high $642 billion in October 2021.  The central bank is believed to have sold over $50 billion to stem the volatility in the foreign exchange market.     

The rupee has been under pressure because of concerns about the interest rate normalization path of the US Fed and the deteriorating growth environment, which have led to an exodus of foreign funds from the domestic markets to the safety of dollar assets.