Foreign exchange reserves of India decreased by USD 1.02 billion, now standing at USD 697.93 billion.
India's Foreign Exchange Reserves Take a Dip, Gold Remains a Strategic Asset
Metropolis: New Delhi
India's foreign exchange reserves (forex) took a minor dip this week, sliding by USD 1.02 billion, landing at a steady USD 697.93 billion, as per the Reserve Bank of India's (RBI) latest data release. The forex reserves had experienced a USD 2.294 billion surge in the previous week, ending at USD 698.950 billion on June 13.
A glimpse at the data as of June 20 reveals that foreign currency assets dipped USD 0.36 billion to USD 589.07 billion. The bank's gold reserves decreased USD 5.73 million, standing at USD 85.74 billion, while the Special Drawing Rights (SDR) dropped USD 85 million to USD 18.67 billion.
Gold, a favored safe-haven asset among central banks worldwide, has found a significant footing in India's foreign exchange reserves kitty. The RBI's gold holdings have almost doubled in shares since 2021.
During 2023, India boosted its foreign exchange reserves by around USD 58 billion in stark contrast to a cumulative decline of USD 71 billion in 2022. In 2024, the reserves witnessed a modest growth of over USD 20 billion. Governor Sanjay Malhotra noted that India's foreign exchange reserves are enough to cover 11 months of the country's imports and about 96% of external debt.
When announcing the Monetary Policy Committee's (MPC) decision outcomes, Malhotra expressed optimism, affirming that India's external sector remains resilient, and key external sector vulnerability indicators are showing steady improvements.
Foreign exchange reserves, or FX reserves, are assets held by a nation's central bank, primarily in reserve currencies such as the US Dollar, with a smaller share in the Euro, Japanese Yen, and Pound Sterling. The RBI actively manages liquidity by selling dollars to prevent excessive Rupee depreciation. The bank strategically buys dollars when the Rupee is stronger and sells them when the Rupee weakens.
According to recent data and analysis, the RBI has significantly upped gold holdings in its foreign exchange reserves, with the gold share nearly doubling since 2021, from approximately 6.86% to around 11.35%. The boost in gold reserves reflects the RBI's strategic move to diversify its foreign exchange reserves in light of rising global and domestic uncertainties driving demand for safe-haven assets like gold. The value of gold reserves in dollar terms also increased sharply in early 2025, cementing gold's growing role in India's foreign exchange reserve composition.
The Reserve Bank of India (RBI) has strategically increased its gold holdings in its foreign exchange reserves, reflecting a shift towards diversification in response to global and domestic uncertainties. In contrast, the reduction in foreign currency assets indicates a dip in India's foreign exchange reserves, despite the bank's active management of liquidity through selling and buying of dollars.
