Kolkata: With foreign investors pouring in dollars in India's markets, Reserve Bank of India is piling up foreign exchanges kitty to newer heights.
The reserves swelled by $3.886 billion in the week to February 27 to $338 billion as RBI bought the US greenback from the local markets to sterilize the continued inflow and prevent the rupee from gaining too strongly.
The reserves rose by a substantial $16 billion in the last five weeks as foreign investors raised investments in Indian stocks amid easy global liquidity and improved local business sentiment.
The rupee closed 62.41 a dollar on Thursday. It has been hovering around 62 to the dollar and has gained almost 2% against the greenback since January.
"An excessively strong rupee is undesirable," RBI governor Raghuram Rajan told analysts on Wednesday after lowering short tern benchmark interest rate. Managing the heavy dollar inflows would be a challenge for Rajan as the central bank would look to protect market stability and prevent the local currency from gaining sharply.
"The fact that it (strong rupee) is undesirable does not mean that we necessarily will act against that if that situation were to arise because I believe that what we can do is perhaps act against temporary undesirable volatility but it is very hard for us to act in a sustained basis to maintain a value of the rupee.
Foreign currency assets, the major contributor to reserves, rose $3.9 billion in the week to February 27 to $312.2 billion. Gold reserves in dollars remained unchanged at $20.183 billion.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.