India’s forex kitty drops $2.6 billion despite gold reserve surge; RBI to broaden reporting

India's foreign exchange reserves fell by $2.6 billion to $682.13 billion as of November 1, 2024, according to the latest data from the Reserve Bank of India (RBI) released on Friday (November 8).

This decline comes after a $3.4-billion drop the previous week, bringing the reserves down to $684.8 billion as of October 25.

The primary factor behind this dip was a significant drop in foreign currency assets (FCAs), which decreased by $3.9 billion to $589.84 billion. Despite this, India's gold reserves saw an uptick, rising by $1.2 billion to a total of $69.75 billion.

Special Drawing Rights (SDRs) dipped slightly by $1 million, now totalling $18.21 billion, while India’s reserve position in the Monetary Fund (IMF) grew by $4 million, reaching $4.3 billion.

Expanding forex reporting requirements

In a move to enhance transparency and ensure complete data reporting, the RBI has announced an expansion of the reporting requirements for foreign exchange transactions.

The new directive includes foreign exchange spot deals, such as cash value and TOM deals, to be reported to the Clearing Corporation of India’s trade repository. TOM deals are currency exchange transactions that take place on the business day following the current one.

Currently, authorised dealers are only required to report over-the-counter (OTC) foreign exchange derivative contracts and foreign currency interest rate derivative contracts.

Also read: Rupee falls 21 paise to all-time low of 84.30 against US dollar

The new rules will come into effect from February 10, 2025. While the scope of these new regulations does not extend to money-changing transactions, all inter-bank foreign exchange contracts involving the rupee or other currencies must be reported to the trade repository (TR).

The RBI clarified that authorised dealers will be responsible for ensuring the accuracy of the transactions reported. Notably, there will be no requirement to match transactions with overseas counterparties, as these entities will not need to report or confirm transaction details.

This expansion of reporting requirements is part of the RBI’s ongoing efforts to bolster transparency, promote financial stability, and improve the efficiency of India’s foreign exchange market.

India's forex kitty

India’s foreign exchange reserves remain among the largest in the world, securing the fourth position globally, just behind China, Japan, and Switzerland. India’s rise from the ‘Fragile Five’ to being the fastest-growing major economy is seen as an inspiring example for other developing nations.

Also read: RBI reverses course, sells $6.49 bn in spot forex market in August, shows bulletin

For the first time, India’s forex reserves surpassed the $700-billion mark in September 2024, reflecting the country's growing economic power. This marks a significant milestone as India is now the fifth-largest economy globally.