RBI Sold Net $8.9 Billion In April, Gold Reserves Hold Steady

The Reserve Bank of India sold a net $8.94 billion in the foreign exchange market during April, according to data released in the central bank’s monthly bulletin on Monday. The RBI bought $16.23 billion and sold $25.17 billion during the month, following net dollar sales of $9.8 billion in March.

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The intervention came during a period of heightened volatility in the currency market. The rupee had touched a record low of 96.96 against the U.S. dollar last month amid higher crude oil prices and rising global bond yields. The currency later recovered after the central bank stepped in across multiple trading sessions during the U.S.-Iran conflict.

Data from the bulletin showed the RBI’s net outstanding forward dollar sales stood at $95.30 billion at the end of April, down from $103.06 billion a month earlier.

Gold Holdings Unchanged

The central bank’s gold reserves remained at 880.52 metric tonnes in May. However, the value of these holdings declined to $112.6 billion from $120.23 billion recorded at the end of April, reflecting changes in global bullion prices.

Earlier this month, the RBI had rejected reports suggesting it had reduced its gold reserves. The latest data confirmed that the quantity of gold held by the central bank remained unchanged.

India’s foreign exchange reserves also fell to $671.6 billion, the lowest level in more than a year, indicating the impact of currency market intervention aimed at supporting the rupee.

Economic Activity Remains Stable

In its bulletin, the RBI said high-frequency indicators for April and May pointed to continued economic momentum despite higher crude oil prices and supply disruptions linked to tensions in the Middle East.

The central bank has projected India’s economy to expand by 6.6% during the current financial year. It also noted that the external sector remained resilient, supported by foreign direct investment inflows and adequate reserve buffers.

Inflation Risks Persist

The RBI said retail inflation remained broadly contained despite a rise in May. Consumer price inflation in April was below the central bank’s 4% target, though it expects average inflation to reach 5.1% in the current financial year.

The bulletin noted that elevated crude oil prices and the possibility of a weak southwest monsoon could pose risks to both growth and inflation. According to the central bank, any adverse impact on the monsoon may affect the domestic growth-inflation outlook.

Recent measures aimed at attracting dollar inflows, along with easing oil prices following progress in U.S.-Iran negotiations, have improved the backdrop for the rupee after months of pressure in the currency market.