Mumbai: India's foreign exchange (forex) reserves have come under pressure with the Reserve Bank of India (RBI) selling dollars to meet demand and intervening in the currency markets to stem the rupee's fall.

Latest data from RBI's weekly statistical supplement shows that India's forex kitty was lighter by more than $5 billion in the week ended 14 November, down to $246.35 billion. RBI is expected to have sold $9.65 billion between April and September 2008 to check the Indian currency from weakening.

Almost the entire decline was reported to be on account of a dip in foreign currency assets, with India's forex kitty shrinking by $45 billion in the seven weeks after 12 September. That was when US investment bank Lehman Brothers filed for bankruptcy.

Reports suggested that the dip in reserves was on account of a combination of factors such as the revaluation of non-dollar assets vis-à-vis the dollar, a sellout by foreign investors, and strong demand by importers as trade finance through the letter of credit (LOC) system with a number of foreign banks was hit because of the global financial meltdown.

However, the government vacated the Rs5,264 crore it borrowed from the RBI under its WMA scheme last week. The central government had borrowed the amount as a temporary overdraft to meet its revenue mismatches after a very long gap, and reversed it in the week ended 21 November, according to the weekly statistical supplement.

On the other hand, states borrowed small amounts. According to the updated money supply figures, the total stock of money in the system went up, hitting the Rs43,77,847 crore mark.

At the present level, the annual year-on-year (YoY) growth in money supply was 19.2 per cent, as against a growth of 23.9 per cent  during the corresponding period last year. 

Foreign investors have withdrawn over $13 billion during the calendar year so far, draining the country's foreign reserve, which has also taken its toll on the rupee. The rupee fell close to 13 per cent during the past three months after the Lehman bankruptcy.