RBI's net short forward positions hit record $137 billion in July

Mumbai: The central bank's net short forward positions jumped $34 billion in July, reflecting long-term swaps written under the special window for forex-inflow programmes.

The total net short forward positions now stand at a record high of $137 billion in July, from $104 billion in June, latest Reserve Bank of India (RBI) data showed.

While defending the rupee through forward sales allows Mint Road to underpin the local unit without having to deplete its existing stockpile, a depreciating trend for the rupee exposes the central bank to future marked-to-market losses when forward commitments are due for maturity.


Short positions with tenure of over one year increased the most to $91 billion in July, from $64 billion in June. According to the RBI, gross inflows of $41 billion had been recorded by July, of which $36.7 billion came through FCNR(B) deposits that have a maturity of 3-5 years.

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"The pick-up seen in the near-term positions is likely due to interventions in the offshore market. There was depreciation pressure on the rupee in July, and the RBI seems to be spreading their intervention across three markets - in spot, NDF and forwards," said Gaura Sengupta, chief economist, IDFC First Bank.

The forward book with maturity of less than one year increased marginally. The up to one-month forwards stood at $13 billion from $10 billion previously, while forwards with a maturity of 1-3 months stood at $7 billion, from $5 billion in June. In the 3-month to 1-year bucket, short forwards stood at $24 billion in July, unchanged from June.

To be sure, India's foreign-exchange reserves surged to a record $729.33 billion in the week ended August 21, reflecting the success of the dollar-inflow programs announced early June.