India's forex reserves shed $60 billion in six weeks as RBI steps in to support rupee, one of Asia's worst-performing currencies this year

India's foreign exchange reserves declined by approximately $60 billion over the course of six weeks, primarily due to aggressive intervention by the Reserve Bank of India (RBI) to shore up the value of the rupee, which has been among the worst-performing currencies in Asia this year. As of October 9, the RBI's forex reserves stood at $726.027 billion, a lifetime high of $785.706 billion recorded on September 4, according to official data.

The reserve stockpile witnessed a depletion of $8.578 billion in the reporting week, as reported by the RBI's weekly statistical supplement. Foreign currency assets, the primary contributor to the reserves, fell by $7.142 billion within the same week to $597.605 billion. The overall depletion in the six-week period amounted to $50.563 billion, representing 35% of the $143.596 billion accumulated by the central bank between June and August through dollar mobilization schemes and the swap window.

The primary driver behind this depletion was the RBI's sales of dollars through large public sector banks to support the weakening rupee. Factors contributing to the rupee's decline include rising crude oil prices, increasing US yields, and persistent outflows of foreign capital from the Indian market. Data from the National Securities Depository Ltd. (NSDL) revealed that foreign portfolio investors withdrew a net $26.8 billion from local markets during the same period this year.

Additionally, India's gold reserves decreased by $1.319 billion in the reporting week, reducing to $105.094 billion. The country's reserve position with the International Monetary Fund (IMF) and special drawing rights also experienced a decline during the week.