The country's foreign exchange reserves crossed the $600 billion mark for the first time after increasing by $6.842 billion in the week ended June 4, RBI data showed on Friday.
The reserves surged to a record $605.008 billion in the reporting week, helped by a rise in foreign currency assets (FCA), a major component of the overall reserves, as per weekly data by the Reserve Bank of India (RBI).
During the monetary policy announcement last week, RBI Governor Shaktikanta Das had said the reserves were on the verge of crossing $600 billion.
"That is something which gives us a great amount of confidence to deal with the challenges arising out of global spillovers, should they happen at a future date," Das had said.
In the previous week ended May 28, 2021, the reserves had swelled by $5.271 billion to $598.165 billion.
In the reporting week, FCA jumped by $7.362 billion to $560.890 billion, the data showed.
Expressed in dollar terms, the foreign currency assets include the effect of appreciation or depreciation of non-US units like the euro, pound and yen held in the foreign exchange reserves.
Gold reserves declined by $502 million to $37.604 billion.
The special drawing rights (SDRs) with the International Monetary Fund (IMF) dipped $1 million to $1.513 billion.
The country's reserve position with the IMF also dropped by $16 million to $5 billion in the reporting week, the data showed.
Commenting on the development, Care Ratings chief economist Madan Sabnavis said the high foreign exchange reserves is a positive sign as it makes the country's external position very strong.
"This (rise in forex reserves) can be attributed to the higher capital inflows and the probable current account surplus we had after a long time," Sabnavis said.
According to him, this quantum of foreign kitty is sufficient to cover the country's imports for 15-18 months.
Kotak Securities Vice President (Currency and Interest Rate Research) Anindya Banerjee said the high forex reserves indicate that the RBI is intervening in the market at a very strong pace to ensure that the rupee does not appreciate.