In response to the panic triggered by Trump's trade policies, the RBI net sold approximately $43 billion in the second half of FY25 to curb volatility, as the rupee plunged to a low of 87.95 per dollar in February this year.
Anjali Kumari
The Reserve Bank of India (RBI) sold $34.5 billion in financial year 2024-25 (FY25) on the net basis, the highest since the global financial crisis of 2008-09, latest data released by the central bank showed.
In addition, the RBI has cut down its forward book for the first time in seven months, which fell to $84.34 billion as on March 31, 2025 as compared to $88.75 billion in February.
After a period of relative stability of almost two years, the Indian rupee (INR) experienced a sharp depreciation in the latter half of FY25, primarily due to a surge in the US dollar index to 108, prompting the central bank to intervene in the foreign exchange market to curb undue volatility.
The rise in dollar index was driven by inflationary concerns following US President Donald Trump's assumption of office.
The RBI had net sold the highest amount of $20 billion in November 2024. The rupee depreciated by 2.4 per cent in FY25.
In response to the panic triggered by Trump's trade policies, the RBI net sold approximately $43 billion in the second half of FY25 to curb volatility, as the rupee plunged to a low of 87.95 per dollar in February this year.
India's foreign exchange reserves also fell from $705 billion in the last week of September 2024 to below $625 billion in January 2025.
"US dollar initially strengthened following Trump's election victory on expectations of pro-growth policies. However, starting January 2025, the dollar lost steam as tariff and tax announcements on foreign countries raised trade war concerns, weighing on the US economy," said V R C Reddy, head of treasury at Karur Vysya Bank.
"This shift supported emerging market currencies, with the INR appreciating sharply from 87.95 (February 10) to 83.75 (May 2)," he added.
The RBI has been a net seller of dollars since October 2024.
However, it was a net buyer of dollars in the first half of FY25 (April-September), with $8.52 billion worth of US dollars purchased during the period. In FY24, the central bank had net bought $41.27 billion.
Further, on the back of the substantial dollar sale during the year, market experts expect the central bank to transfer a record surplus to the government.
The RBI gross sold around $399 billion during FY25. The rupee saw significant volatility over the year, allowing the RBI to capitalise on dollar sales and record gains, they said.
"The high dollar sale will be the basis for the record dividend from the RBI to the government this year," said Madan Sabnavis, chief economist at Bank of Baroda.
"The gross numbers are quite higher than net sale data," he added.
The central bank is expected to transfer a surplus between Rs 2.5 trillion and Rs 3 trillion for FY25, against Rs 2.1 trillion in FY24.
The RBI had net bought the highest amount in March 2025 when the rupee regained strength against the dollar, buoyed up by inflows after hitting new lows earlier in the year.
The RBI intervened in the foreign exchange market to curb excessive volatility and conducted buy/sell swap auctions.
These measures helped inject rupee liquidity into the banking system while also supporting the rupee amid global uncertainties.
As a result, the rupee strengthened significantly in March, recovering from nearly 88 per dollar to regain all losses for the calendar year (CY25).
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Notes In Circulation Rose To Rs 34.8 Trn In 2024
It was around Rs 2.1 trillion in 2001.
Anjali Kumari
The volume of Notes in Circulation (NiC) has increased in recent years, despite a decline in cash usage in India since the 1990s.
This growth is partly attributed to precautionary cash holdings during the Covid-19 pandemic.
According to the Reserve Bank of India's (RBI) monthly bulletin, NiC rose to around Rs 34.8 trillion in 2024 from around Rs 2.1 trillion in 2001.
The views expressed in the bulletin are those of the authors and do not necessarily represent the RBI's official stance.
Over the past two decades, the demand for physical cash has evolved significantly.
Factors such as the rapid expansion of bank branches and ATM networks, increased penetration of internet-enabled phones, and significant advancements in payment and settlement systems have contributed to a lower compound annual growth rate (CAGR) in NiC in the last decade.
Between 2004 and 2024, in each of the two 10-year periods, the CAGR of NiC in value terms was higher than that in volume terms, indicating a shift towards higher denomination notes.
"In each of the two 10-year periods between 2004 and 2024, CAGR of NiC in value was higher than that in volume, indicating a shift towards higher denominations.
"It is worth noting that the growth rate in NiC (in value terms) in the 10-year period between 2014 and 2024 was significantly lower as compared to the previous two decades," the report said.
While NiC growth outpaced GDP growth between 1994 and 2004, the gap narrowed considerably in the subsequent two decades.
Between 2005 and 2014, the number of ATMs per lakh adults increased dramatically, with a CAGR of slightly over 25 per cent.
Evidence suggests that during normal periods (ie, periods not affected by events like COVID-19), easier access to ATMs reduces households' cash holdings, as they are more comfortable maintaining lower balances.
This reduces their need for precautionary cash holdings.
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Net FDI Sees A Fall Amid Repatriation Surge
Gross FDI remained elevated in FY25, with 13.7 per cent year-on-year (Y-o-Y) growth to clock $81 billion worth of flows.
Abhijit Lele
Net foreign direct investment (FDI) in India crashed by more than 96 per cent to $0.4 billion in FY25 from $10.1 billion a year ago due to higher repatriation and outward flow. Net FDI was $ 28.0 billion in FY23.
The decline in FY25 is "a sign of a mature market where foreign investors can enter and exit smoothly, which reflects positively on the Indian economy," said the State of the Economy report by the Reserve Bank of India (RBI) in its monthly bulletin (May 2025).
Gross FDI remained elevated in FY25, with 13.7 per cent year-on-year (Y-o-Y) growth to clock $81 billion worth of flows. It was $ 71.3 billion in (FY24) and 71.4 in FY23, according to RBI data.
More than 60 per cent of gross FDI inflows in FY25 were in manufacturing, financial services, electricity and other energy, and communication services sectors.
Singapore, Mauritius, the UAE, the Netherlands, and the United States (US) accounted for more than 75 per cent of the flows, said the report.
Repatriation/disinvestment by those who made direct investments in India increased to $51.5 billion in FY25 from $ 44.5 billion in FY24 and $ 29.3 billion in FY23.
Overseas investments made by Indian companies (outward FDI) increased to $ 29.2 billion in FY25 from $16.7 billion a year ago and $14 billion in FY23.
Singapore, the US, United Arab Emirates, Mauritius and The Netherlands together accounted for more than half of the rise in outward FDI.
Financial, banking and insurance services, followed by manufacturing; wholesale, retail trade, restaurants and hotels accounted for more than 90 per cent of outward FDI, said the report.
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NRI Deposit Inflows See A Rise
NRI deposit schemes include foreign currency non-resident (FCNR) deposits, non-resident external (NRE) deposits and non-resident ordinary (NRO) deposits.
Abhijit Lele
The country's diaspora put 9.9 per cent more money in banks' non-resident Indian (NRI) accounts during 12 months of FY25 compared to a year ago.
Inflows to deposit schemes for NRIs grew to $16.16 billion from $14.70 billion in FY24, according to the Reserve Bank of India (RBI).
Total outstanding NRI deposits reached $164.7 billion at the end of March 2025, up from $151.9 billion the same time last year.
Sequentially, outstanding deposits were at $160.33 billion in February 2025.
NRI deposit schemes include foreign currency non-resident (FCNR) deposits, non-resident external (NRE) deposits and non-resident ordinary (NRO) deposits.
In FY25, the maximum inflows came to FCNR (bank) or FCNR(B) deposits.
As much as $7.1 billion flowed into FCNR (bank) accounts in FY25, compared to $6.3 billion the year before. Outstanding amount in FCNR (B) accounts stood at $ 32.8 billion at the end of March 2025, according to RBI data.
An FCNR (B) account lets customers maintain a fixed deposit in India in freely convertible foreign currencies for a tenure ranging from one to five years.
As the account is in foreign currency, it secures funds against currency fluctuations during the tenure of the deposit.
Meanwhile, NRE deposits saw an inflow of $4.7 billion during this period (Fy25), compared to $4.2 billion in the corresponding period a year ago (Fy24).
Outstanding NRE deposits stood at $100.7 billion in March 2025.
NRO deposits also saw inflows of $4.4 billion in FY25, compared to $4.2 billion a year ago. The total outstanding amount in NRO deposits was $31.1 billion in March 2025. An NRO account is a rupee-denominated bank account for NRIs (check this)
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Foreign Tourist Arrivals In Sync With Travel Search
Inbound tourism to India has rebounded strongly post-Covid, with search trends and foreign exchange data pointing to the sector's key role in employment and growth.
Aathira Varier
There is a strong association between foreign tourist arrivals (FTAs) and their travel search volume index to India as inbound tourism is emerging as one of the key economic growth drivers, according to a report in the Reserve Bank of India's (RBI's) monthly bulletin for May.
Visits by foreign tourists, which dropped due to Covid-19 restrictions in March 2020, saw a revival in November 2021.
There has been a significant increase in foreign tourists coming to India in 2023 due to the G20 Summit, meetings, incentives, conferences, and exhibitions (MICE) events, leisure trips, and the return of business travellers.
The ICC Cricket World Cup also boosted India's tourism. There was also a surge in tourism in the first half of 2024.
According to the research paper, travel and tourism created 76.17 million jobs in 2022-23, which is 12.57 per cent of total jobs created during the same period.
Also, the foreign exchange earnings from the tourism industry for 2023 reached Rs 2.32 trillion, marking an increase of over 66 per cent compared to 2022.
"There is a significant correlation between FTA and GVA-THTCB (GVA - Trade, Hotels, Transport, Communication and Services related to Broadcasting) for Q4FY21 to Q4FY24 (0.71), which supports the earlier argument that FTAs contribute directly and indirectly to GVA (Gross Value Added)," the research paper said.
The views in the report are that of the authors and not of the central bank.
"Empirical results show a strong correlation between FTA for the current month and travel search volume index for preceding five months," the paper added.
Feature Presentation: Aslam Hunani/Rediff.com
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