The monthly RBI Bulletin tells us how RBI trades in the forex market, with a 2 month lag. In October, the RBI bought $9.5 billion (mostly from banks with the FCNR NRI Deposit Swap), and sold $5.6 billion (both in the market and to Oil Marketing Companies through the OMC swap).
Because of the nature of these swaps, there is a trade done now and a “forward” contract for later. The FCNR swap involves the RBI buying dollars from banks now, but a forward that will sell them back the dollars after three years. So while reserves go up for now there is a future liability in the form of forwards.
And the outstanding forex exposure has reached the highest ever (on the sales side).
It will be even greater in November, when the FCNR swap completed. Data for that will come in Jan 2014. We must now wait patiently for November 2016, when these swaps unwind, and RBI will have to sell from its reserves.
Remember, the OMC and FCNR swaps are both non-operational at this time. The impact of RBI’s trading in the actual forex market will be visible on market operations in December, data for which comes in February.