RBI sold $213 billion worth of forex to curb sharp volatility in the rupee

Reserve Bank grounds to prevent rupee depreciation

Forced to sell 120% more gold in 2022-23 than last year

AHMEDABAD: The Reserve Bank of India has sold a total of $213 billion worth of foreign currency in the financial year 2022-23. According to the figures released by the central bank in its monthly bulletin on May 22, this figure is 120 percent higher than in 2022.

The RBI sold significant dollars in 2022-23 in an effort to reduce volatility in the rupee exchange rate following the turmoil in global financial markets following Russia's invasion of Ukraine in February 2022. Apart from instability in financial markets due to the war, the rupee has been under significant pressure due to a sharp rise in import bills due to rising global commodity prices in 2022-23.

Talking about the monthly figures, the Central Bank bought a net of $750 million worth of foreign currency in March. It sold $6.16 billion against a total purchase of $6.91 billion last month. Further, according to the RBI Bulletin, RBI's outstanding position in the forward market stood at $23.6 billion at the end of 2022-23. At the end of February this figure was 20.47 billion dollars. Most of RBI's forward activity is in the 'more than 3 months and up to 1 year' bucket.

Economists peg the historical average acquisition cost of RBI's foreign currency holdings at around Rs 62-65 per dollar. Meanwhile, the average monthly exchange rate of the rupee against the US dollar in 2022-23 ranged from 76.2 to 82.7.

On May 19, the Central Board of Directors of RBI declared a dividend of Rs. 87,416 crore was approved for transfer.

This is about Rs 40,000 crore more than the Rs 48,000 crore received by the government. This dividend transferred by RBI to the government in 2021-22 is Rs. 30,307 crore is almost three times as much.

Intervention had to be done to stabilize the rupee

  RBI Governor Shaktikanta Das defended the RBI's decision to intervene in the forex market last year to stabilize the rupee. It is the central bank's responsibility to ensure that the exchange rate remains stable. There was a huge outflow of dollars last year due to the Russia-Ukraine war. Due to the intervention of the Reserve Bank, confidence is created among domestic and international investors. The forex reserves saw a decline to $524 billion last year due to the drop in dollar value. However, forex reserves are currently strong, and have come close to $600 billion. RBI endeavors to maintain strength in forex reserves.