There is a widespread misconception that the Reserve Bank of India (RBI) has been depleting India’s foreign exchange (forex) reserves to defend the rupee. The RBI cannot simply fritter away India’s forex reserves, held mostly in dollars, by charging its “nostro” account with the Federal Reserve Bank of New York, New York. The RBI is the custodian of India’s forex reserves and is responsible for managing their investments economically. The central bank may not have been adventurous in switching currencies to boost the value of reserves. But to suggest that the RBI has depleted India’s forex reserves from $642 billion to $537 billion, i.e., from September 8, 2021 to September 30, 2022, by intervening (selling dollars) in India’s inter-bank forex market is manifestly erroneous. (Read More)
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