The Reserve Bank of India (RBI) has taken a number of actions in the foreign exchange market, including selling dollars, as part of its efforts to pay dividends to the government later this year.

The banking regulator has been selling the greenback since August to book gains in line with the accounting principle adopted in 2019, The Economic Times reported. Since 2019, the RBI has marked the difference between the average historical cost of dollar holdings in the forex reserves kitty and the price at which the currency is sold as gains.

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If the average holding cost of the dollar is Rs 59 and the current price is Rs 74, the RBI would book a gain of Rs 15 for every dollar sold. The average holding cost of the dollar is calculated based on dollars bought at different exchange rates at different points over the years.

According to monthly data released by the RBI, the central bank has bought and sold a large and equal amount of foreign exchange in the spot market in the past few months. While the sale transactions help the RBI generate surplus, purchase of dollars replenishes the reserves.

Data revealed that RBI sold $8,489 million in November and bought exactly the same amount, while sale and purchase of dollars in October stood at $7,855 million and $7,755 million, respectively, the ET report said.

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Similarly, the RBI bought and sold $9,169 million and $8,378 million dollars in September and $10,887 million and $7,140 million in August.

While the RBI has done the same operation in FY21, this year it has started early. "In 2020-21, bulk of the purchase happened during the last three to four months of the fiscal. This time, RBI has begun early, probably to avoid disruptions... as a result not many in the market may have noticed it," ET quoted a senior bank official as saying.

Also read: RBI's strong FX reserves will insulate rupee: CLSA

Meanwhile, lenders like Axis Bank and ICICI Bank have sold barrier forex options to customers such as Reliance Industries and Supreme Petrochem Ltd after the RBI allowed bankers to offer derivative products earlier this month, Mint reported.

Allowing corporates to participate in exotic forex derivatives is part of the RBI efforts to deepen the financial markets and give corporates more risk-management options, the report said.

(Edited by : Shoma Bhattacharjee)

First Published:Jan 21, 2022 6:25 PM IST