Forex reserves below Chinese level not comfortable: Rajan

Tags: News
Reserve Bank Governor Raghuram Rajan has said unless foreign exchange reserves rise to the level of the Chinese, the economy cannot be said to be insulated from external shocks.

"We have a lot of forex reserves. Right now, it is $ 300 billion plus. So, the key question is at what point you feel safe. I think, if you focus only on reserves, there is really no point at which you feel safe.. 400, 500, 600...Any level of reserves, until you get to Chinese level, it is probably not enough," he told researchers and analysts in the customary post-policy concall.

He was answering a question on whether the RBI was comfortable with the current level of reserves.

The comments assume importance as the traditional position of the central bank has been not to set a forex reserves target.

China's foreign exchange reserves stood at staggering $ 3.66 trillion as of end 2013, making it the largest in the world, while at the best of times, India could not shore up more than $ 322 billion.

The country's forex reserves rose to $ 298.6 billion in the week ended March 21. But on March 31, Finance Minister P Chidambaram said the reserves had crossed $ 300 billion by that day. RBI would release the formal numbers tomorrow.

Since Rajan assumed office on September 4, the reserves have gone up by over $ 25 billion. On August 30 last, the reserves stood at $ 275.5 billion which crossed $ 300 billion as of March 31. The reserves had surged to an all-time high of $ 322 billion in September 2011.

Rajan said instead of building just reserves, there is a need to focus on creating policy environment which boosts investor confidence. "We, at the RBI, have been trying to provide this confidence and I think this is a far better way."

The Governor said the central bank's intervention in the foreign exchange market is only to curb volatility caused by the higher inflows or outflows.

"Our intervention in exchange market has historically been to reduce exchange rate volatility. And that's not just the volatility today but also the anticipated volatility if the exchange rate becomes unduly strong because of extreme inflows or unduly weak because of extreme outflows."

"So, to the extent we have to intervene to prevent that kind of volatility, we have plenty of reserves," he said.


  • India’s economic recovery has to be consumption, and not investment, led

    It is well accepted that falling global commodity prices, especially oil, have helped the Indian economy regain lustre in the past year or so.


Stay informed on our latest news!


Sarthak Raychaudhuri

vice-president, HR, Asia South Whirlpool of India

GV Nageswara Rao

MD & CEO, IDBI Federal Life

Timothy Moe

Goldman Sachs


Amita Sharma

Smart cities for the smart citizens

The 21st century has been spoken of as the urban ...

Purnendu Ghosh

Too shy people love themselves too much

We are essentially shy people. Our extent of shyness, however, ...

Shona Adhikari

When nature and naturism have a date

DAG Modern has announced its forthcoming exhibition The Naked and ...


William D. Green

Chairman & CEO, Accenture