The SDR share of foreign exchange reserves stood at $18.06 billion. The country's foreign exchange reserves have overall increased by $11.5 billion in the current financial year. India's foreign exchange reserves had reached an all-time high of $704.885 billion at the end of September, taking the country to fourth place after China, Japan and Switzerland in terms of the size of foreign exchange reserves. This reflects the strong macroeconomic fundamentals of the economy. RBI uses foreign exchange reserves to control the volatility in the rupee, which results in hot money flowing out of the stock market when foreign investors sell shares.
Meanwhile, Reserve Bank Deputy Governor Rabi Shankar said at a media event recently that the RBI is well equipped to handle excessive exchange rate volatility that could result from Donald Trump's presidency. In case of a sharp fall in the rupee, the RBI releases dollars in the market to prevent it from going into free fall. This helps in maintaining stability in the Indian currency. Strong foreign exchange reserves help facilitate these operations and strengthen the rupee.
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