Summary:

According to Bank of America, India's foreign-exchange reserves are projected to reach $745 billion by March 2026, strengthening the central bank's capacity to influence the rupee. Analysts Rahul Bajoria and Abhay Gupta noted that the monetary authority is comfortable accumulating higher foreign reserves to hedge against external risks. India's reserve adequacy is strong compared to other major developing economies, yet it is not deemed excessive.

India currently holds the world's fourth-largest foreign reserves at $692 billion, bolstered by increased offshore investments in its equities and bonds. This substantial reserve supports the rupee during external shocks, allowing the Reserve Bank of India (RBI) to buffer against excessive currency volatility. RBI Governor Shaktikanta Das has emphasized the significance of creating a forex buffer to mitigate market fluctuations. Analysts pointed out that wider daily ranges for USD/ INR provide limited opportunities for INR appreciation while increasing volatility.

Source: IBEF

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