Notwithstanding a USD 12.6 billion or 4.3 per cent fall in forex reserves since the beginning of the current fiscal, much of which could have been used to contain rupee volatility, the currency still remains battered with a loss of 9.7 per cent.
On Friday, however, the rupee breached a nine-week long losing streak against the US dollar.
According some analysts, who did not want to be named, a large part of the reserves could have been used to check the volatility in the forex market.
While the rupee lost 9.7 per cent between April 2 (54.25 to the US dollar) and July 12, when it closed at 59.57, during the same period (between the weeks to April 5 and July 5), the forex reserves plunged by 4.28 per cent or USD 12.48 billion to reach USD 280.17 billion from USD 292.65 billion.
The analysts said this indicates the central bank's efforts at containing the rupee volatility, which have not met with the desired results.
Meanwhile, according to Bank of America-Merrill Lynch India chief economist Indranil Sen Gupta, the RBI, whose official position is not targetting a level for the rupee but to contain volatility in the forex market, still has a leg-room of around USD 20 billion to support the rupee.
Significantly, this USD 12.5 billion plunge is a not even half the dollars that the RBI had sold between July 2012 and July 2011, as in that period the depletion in the forex reserves was a whopping USD 27 billion, to support the rupee.
According to the latest forex reserves data released by RBI on Friday, the reserves have plunged by a whopping USD 4.478 billion to USD 280.17 billion in the week to July 5.
Similarly, foreign currency assets, too, fell by USD 3.175 billion to USD 252.1 billion, according to the Reserve Bank data during the reporting week.
Out of this USD 12.5 billion forex reserves depletion, majority of it or USD 10.5 billion were sold during the past three weeks alone, when every week the rupee has been breaching new psychological levels, with July 8 begin the worst day as it closed at 61.20 against the dollar.
The analysts said the plunge has not only made the import cover whipsawed to just six months, it has also made the overall balance of payment position vulnerable as the country has to shell out a whopping USD 170 billion to pay back the short-term external debt over the next 12 months.