Despite withdrawal by foreign investors from the market, India’s foreign exchange reserves increased by $2.579 billion to $586.111 billion during the week ended on October 27, the Reserve Bank of India said on Friday.
A $5 billion dollar-rupee swap conducted by the RBI last year, where it sold dollars and bought rupees, matured on October 23, leading to a reversal of the trade. The reserves data for the week reflects the impact of this maturity.
As the $5 billion forex swap matured on Monday, banks delivered the entire amount to the Reserve Bank of India (RBI) in one go, market participants said.
Under the swap, the central bank last year sold dollars to banks with an agreement to buy back those dollars at maturity.
“The delivery (of $5 billion forex swap) happened without any issue. The entire $5 billion has gone from the banking system to the RBI. It was a contract undertaken by the RBI with the various banks one-and-a-half years back, so automatically the dollars went from the banks’ account to the RBI’s account,” said a treasury official at a public sector bank.
