MUMBAI: The Reserve Bank of India bought a net of $ 5.6 billion in December according to the latest RBI data. This is the highest net spot purchases done by the central bank in 33 months, an analysis of past data indicated.
The central bank bought $ 6 billion and sold $ 361million in the spot markets in December, resulting in a net spot intervention of $ 5.6 billion during the month. Additionally it sold $1.5 billion in the forward market.
The Reserve Bank which is mandated to maintain orderly conditions in the currency markets, buys or sells dollar to maintain a desired level of the dollar. During the month, though foreign portfolio investor were seen pulling out funds from the Indian market, there were strong inflows in the form of FDI- $4.4bilion and NRI deposits of close to $2.5 billion in December which prompted the central bank to buy dollars. Despite the dollar purchase by the central bank, the rupee gained close to 80 paise or over 1% to the dollar.
The Reserve Bank added almost $ 9 billion during the month. Experts say the reserve pile up will come handy in financing the widening trade deficit on account of higher crude and other commodity import bill.