- After remianing a net purchaser of US dollar for three consecutive years, RBI became the net seller of US dollar in FY2023.
- RBI sold $25.52 billion on a net basis in the spot foreign exchange market in FY 2023.
- The rupee came under heavy pressure due to the Russia-Ukraine conflict and interest rate hikes by the US Federal Reserve.
- The sale of dollars by the RBI was aimed to curb the volatility in the rupee.
Why RBI become a net seller of US dollars?
- The rupee depreciated to 82 levels against the dollar as on March, 2023, from 76 in April 2022.
- Higher import bills due to a surge in oil prices after the Ukraine war had put pressure on the domestic currency.
- The rupee was depreciating primarily on the widening of the current account as oil prices rose due to the Ukraine war, therefore RBI went in for sale of dollars.
- The rupee also declined as foreign investors pulled out money from the domestic market after the US Federal Reserve raised interest rates to check inflation.
What was the value of dollars sold by the RBI?
- On a gross basis, the RBI sold $212.57 billion in the spot market and, at the same time, it purchased $187.054 billion.
- Therefore, on a net basis, the RBI sold $25.516 billion in the spot market.
- In March 2023, the central bank was a net buyer of $750 million after it purchased $6.91 billion and sold $6.16 billion in the spot market.
What was the impact on Indian Economy?
- The RBI booked a huge profit in FY2023 by selling dollars as they were bought at lower levels and sold at higher levels.
- As the RBI made a huge profit, its dividend payout to the Central Government in FY2023 was also higher.
- The RBI Central Board approved a transfer of Rs 87,416 crore as surplus or dividend to the Central Government for the accounting year 2022-23. This is a 188 percent jump from the last year’s (2021-22).
SOURCE: THE HINDU, THE ECONOMIC TIMES, PIB