India's Forex Reserves reached the lowest level in five months, gold reserves also declined, RBI released figures

India's foreign exchange reserves reached its highest level in October 2021. At that time foreign exchange reserves had reached an all-time high of US$645 billion. After which, amid pressure due to global growth since last year, RBI had spent foreign reserves to protect the Indian currency rupee.

Foreign currency assets, the main component of foreign exchange reserves, declined by US $ 707 million to US $ 519.529 billion in the quarter under review as of October 6.

Apart from foreign currency, there has also been a decline in India's gold reserves. RBI said gold reserves declined by a massive USD 1.425 billion to USD 42.306 billion.

Foreign currency held by the central bank of a country is called foreign exchange reserves. Since all foreign transactions are denominated in US dollars, the country has to depend on foreign reserves to finance imports.

Foreign currency assets are mostly invested in international instruments with the highest credit ratings. Having more foreign reserves increases the confidence of international investors, due to which Foreign Direct Investment (FDI) also increases.