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Banks (Finance)

RBI Turns Seller of US Currency in FY2023, Earning $25.516 Billion Dividend for Government

Strategic Insights

— 2 min read

The Reserve Bank of India (RBI) reversed its three-year trend of being a net buyer of US currency in the fiscal year ended March 31, 2023. The central bank sold $25.516 billion on a net basis in the spot foreign exchange market, compared to purchases of $187.054 billion and sales of $212.57 billion in the previous fiscal. The RBI's intervention in the foreign exchange market aimed at stabilizing the rupee movement, but the sale of dollars also helped the central bank book a significant profit. The profit, reflected in a higher dividend payout to the government, was $87,416 crore, a 188 per cent jump from the previous year's surplus transfer of Rs 30,307 crore.

Key Takeaways:

  • RBI sold $25.516 billion on a net basis in the spot foreign exchange market in FY2023, after being a net buyer for three consecutive years.
  • The central bank's net purchases of dollars were $17.312 billion in FY2022, $68.315 billion in FY2021, and $45.097 billion in FY2020.
  • RBI sold $15.38 billion on a net basis in FY2019 and $15.38 billion on a net basis in FY2023.
  • The rupee depreciated by around 8 per cent from close to 76 levels on April 1, 2022, to nearly 82 as on March 31, 2023.
  • Without RBI's sale of dollars, the rupee would have weakened to 84-85 levels against the dollar, according to Amit Pabari, Managing Director and Founder, CR Forex Advisors.
  • The country's foreign exchange reserves declined from $606.475 billion as on April 1, 2022 to $578.449 billion as on March 31, 2023.
  • RBI Governor Shaktikanta Das stated that 67 per cent of the decline in reserves was due to valuation changes arising from an appreciating US dollar and higher US bond yields.
  • The RBI's sale of dollars in FY2023 helped the central bank book a profit, resulting in a higher dividend payout to the government of $87,416 crore.

Statistics:

  • RBI's net sales of dollars in FY2023: $25.516 billion
  • Country's foreign exchange reserves as on April 1, 2022: $606.475 billion
  • Country's foreign exchange reserves as on March 31, 2023: $578.449 billion
  • RBI's dividend payout to the government for FY2022-23: Rs 87,416 crore
  • RBI's dividend payout to the government for FY2021-22: Rs 30,307 crore
  • RBI's net sales of dollars in July 2022: $19.05 billion
  • RBI's net purchases of dollars in March 2023: $750 million

Sources:

  • RBI's monthly bulletin
  • Bank of Baroda's Chief Economist Madan Sabnavis
  • Amit Pabari, Managing Director and Founder, CR Forex Advisors
  • RBI Governor Shaktikanta Das

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