India has built a strong foreign exchange safety net even as the US Iran war has created pressure on the global economy. India forex reserves have now crossed $740 billion, reaching their highest level ever. The rise has given the country a bigger financial cushion during a period of high oil prices and global uncertainty.
A major reason behind this increase is the Reserve Bank of India (RBI) special FCNR(B) deposit scheme. Under this plan, Indian banks were encouraged to attract foreign currency deposits from Non Resident Indians (NRIs). The RBI also helped reduce the currency hedging cost, making the deposits more attractive. The scheme brought in $136.38 billion, much higher than the RBI initial estimate of around $80 billion. FCNR(B) deposits contributed $127.23 billion, while foreign currency bonds and external commercial borrowings added more funds.
The stronger forex reserves have also supported the Indian rupee. The rupee recently gained 49 paise to close at Rs 94.48 against the US dollar, its strongest level in two months. Experts say the RBI move helped reduce pressure on the rupee. India now has forex reserves covering more than 10 months of imports, giving the economy better protection against external shocks. However, experts warn that India still depends heavily on imported crude oil and must continue building stable sources such as exports, FDI and remittances.
