Net forward sales of the dollar/अमेरिकी डॉलर की शुद्ध फॉरवर्ड बिक्री:

Why in News ? The Reserve Bank of India’s (RBI) outstanding net forward sales of the dollar have surged to $67.93 billion as of December 31, 2024, as the central bank intensified its efforts to stabilise the rupee. This marks a significant increase in outstanding forward dollar sales of $14.58 billion just three months ago in September 2024, and a substantial rise from $541 million during the year ended March 2024.

• The high forward dollar sales position indicates that the RBI has been actively selling dollars in the forward market to defend the rupee amid concerns over US trade policies, sluggish domestic growth, and FPI outflows. In the spot market, the RBI’s dollar sales stood at $45 billion in the third quarter—$15.15 billion in December 2024, $20.22 billion in November and $9.27 billion in October—while it bought dollar worth $9.63 billion in September 2024, according to RBI data.

What is Net outstanding forward sales of the U.S. dollar ?

• Net outstanding forward sales of the U.S. dollar by the Reserve Bank of India (RBI) refer to the amount of forward contracts in the forex market that the RBI has sold, which are yet to mature. This is a tool used by the RBI to manage currency volatility and liquidity in the Indian financial system.

Purpose:

• Forward sales are used to stabilize the rupee and manage forex reserves effectively.
• It helps reduce excessive volatility in the exchange rate of the rupee against the U.S. dollar.

Current Status (as of December 2024):

• RBI’s net outstanding forward sales of the U.S. dollar stood at $67.9 billion, up from $58.9 billion in November 2024.

How it Works:

Forward Sales: The RBI sells dollars in the forward market, promising to deliver them at a future date at an agreed-upon price.

Impact: This helps in supplying dollars to the market without impacting the current spot reserves.

Significance:

• Provides a buffer against speculative attacks on the rupee.
• Assists in maintaining adequate foreign exchange liquidity without depleting spot reserves drastically.

Challenges:

• Large forward sales positions can impact market perception, potentially leading to higher forward premiums.
• It could also result in future obligations for the RBI, depending on the market conditions at maturity.

This strategy forms part of the RBI’s broader forex management policy, aimed at ensuring financial stability and protecting the rupee from extreme volatility.