Forex reserves shrink by $5.5 b

Our Bureau

Mumbai, Nov. 7 The foreign exchange reserves continued to decline for the sixth consecutive week, falling by $5.532 billion to touch $252.883 billion for the week ended October 31.

The reserves have fallen by more than $31 billion in the past one month alone.

Sustained dollar selling by the Reserve Bank of India in the forex markets, huge amounts of FII outflow from the domestic equity markets, and the revaluation of the reserves have put pressure on the country’s reserves, said currency dealers.

For the week ended October 24, forex reserves fell by $15.47 billion—the largest fall in a single week ever--to $258.415 billion.

RBI intervention

Intervention by the RBI in the forex markets to support the domestic currency caused the decline in reserves, said Mr Ashish Parthasarathy, Deputy Treasurer, HDFC Bank.

The RBI has been selling dollars on a sustained basis after the rupee breached the 50 level against the dollar in October.

In the week under consideration, the dollar strengthened against the euro and the pound in the overseas markets, which had a revaluation effect on the reserves, partly causing the decline, said a dealer with a private bank.

FII selling

According to the figures released by the Securities and Exchange Board of India, the foreign institutional investors have been net sellers in the equity markets to the tune of $809.10 million for the week ended October 31.

According to RBI’s Weekly Statistical Supplement, foreign currency assets decreased by $5.349 billion to $244.045 billion.

While gold reserves fell by $183 million to $8.382 billion, SDRs remained unchanged at $9 million respectively.

The reserve position in the IMF decreased by $31 million to $447 million.

Bank credit

Bank credit increased by Rs 7,637 crore over the last fortnight, to Rs 26,15,041 crore as on October 24.

It had risen by Rs 64, 937 crore in the fortnight ended October 10.

Food credit decreased by Rs 640 crore to Rs 48,255 crore while non-food credit increased by Rs 8,277 crore to Rs 25,66,787 crore .

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