As per the data showed by the Reserve Bank of India (RBI), the country’s foreign exchange reserves declined by $2.415 billion reaching $576.869 billion in the week ended April 2.
In the week ending March 26, the reserves saw a fall of $2.986 billion, bringing the forex reserves at $579.285 billion. In the week ended January 29, 2021, the forex piggy bank touched the record high at $590.185 billion. Though, on March 16, India’s forex crossed Russia position and became the world’s fourth-largest as per reporting.
In the week ended April 2, 2021, the decline in the reserves was mainly due to a fall in foreign currency assets (FCAs), a major component comprising the overall reserves.
The weekly data of RBI showed a fall of FCA by $1.515 billion bringing it down to worth $536.438 billion.
Foreign Currency Assets (FCA) is the most essential component of the RBI’s foreign exchange reserve. These are the assets like US Treasury Bills bought by the RBI using foreign currencies. The foreign currency assets (FCAs) also includes the factors affected by the appreciation or depreciation of non-US units like the euro, pound and yen held in the forex reserves.
As per the data released by the central bank, the gold reserves also saw a fall of $884 million, falling down to $34.023 billion in the reporting week.
The Special Drawing Rights (SDRs) with the International Monetary Fund (IMF) dropped own by $4 million, reaching $1.486 billion.
The SDR is considered as the unit of account of the IMF and some other international organizations. As per the IMF, “It is neither a currency nor a claim on the IMF. Rather, it is a potential claim on the freely usable currencies of IMF members. SDRs can be exchanged for these currencies.”
Commenting on the position of SDR, IMF says, “The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves. So far SDR 204.2 billion (equivalent to about US$293 billion) have been allocated to members, including SDR 182.6 billion allocated in 2009 in the wake of the global financial crisis. The value of the SDR is based on a basket of five currencies—the U.S. dollar, the euro, the Chinese renminbi, the Japanese yen, and the British pound sterling.”
The data also showed that the country’s reserve position with the IMF decreased by $12 million to $4.923 billion in the reporting week.