India's Foreign Exchange Reserves Rose By Record $101.5 Billion In FY21, Likely To Cross $640 Billion In FY22RBI headquarters in Mumbai. (INDRANIL MUKHERJEE/AFP/Getty Images)

India's foreign exchange reserves surged by $101.5 billion in the financial year 2020-21, marking the steepest rise in the forex kitty in any one financial year so far, reports Economic Times.

According to the weekly statistical supplement of the Reserve Bank of India (RBI), as of 26 March, the nation' foreign exchange reserves stood at $579.3 billion. At its peak in January, the reserves swell to record high of $590 billion.

As per Bloomberg's data, India's foreign exchange reserves now stand at the third highest in the world after those of China and Japan. Furthermore, as per Bank of America estimates, RBI could accumulate more of the reserves in the new financial year, with the intervention pegged at as much as $45 billion in FY22 with the current account deficit being estimated at 0.5 per cent of the GDP.

According to the report, Rahul Bajoria, chief India economist at Barclay's Capital, expects that by March 2022, India's foreign exchange reserves could be as high as $645 billion.

It should be noted that it took RBI 12 years to build its first $100 billion war chest after the balance of payment crisis in 1991, when India had been left with reserves to cover only 15 days of imports. Compared to that, at present, India's forex reserves can cover more than a year's import payments, if needed.

Recently, RBI's Governor Shaktikanta Das had said, "Under an uncertain global economic environment, emerging market economies typically remain at the receiving end. In order to mitigate global spillovers, they have no recourse but to build their own forex reserve buffers."

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