The reserves have been declining likely due to RBI intervention aimed at aggressively preventing a sharp depreciation of the Rupee. A substantial foreign exchange reserve buffer also helps shield domestic economic activity from global shocks.

The reserves have been declining for the last few weeks, and the drop has been attributed to revaluation along with forex market interventions by RBI to help reduce volatilities in the rupee. The forex reserves had increased to an all-time high of USD 704.885 billion in end-September.

India's foreign exchange (forex) reserves have witnessed a steep fall, hitting a low not seen in over seven months. According to the Reserve Bank of India (RBI), the reserves were at $644.39 billion on December 20,