The Reserve Bank of India (RBI)'s foreign exchange intervention activity declined sharply in December 2012, with net sales of only $50 million as against $921 million in November.
The forex intervention reflects buying and selling of dollars in the spot currency market. The central bank bought US currency worth $1,685 million and sold $1,735 million in December, according to its monthly bulletin.
RBI has sold dollars in substantial amounts to curb the sharp volatility, usually downwards, in the rupee against the dollar. Its level of operation in the forward market also declined in December. Net forward sales were $13.48 billion, down from $13.53 billion in November.
Meanwhile, external commercial borrowing by Indian companies in December was $1.14 billion, down marginally from $1.34 billion in November.
Fund raising abroad by Indian companies was much higher in December 2011, at $4.37 billion, RBI said.