India has been gradually decreasing its holdings of United States Treasury securities, signaling a diversification of its foreign exchange reserves and a move towards increasing its gold reserves. According to recent data, India's holdings of US T-bills dropped to $227 billion in June 2025, compared to $242 billion a year earlier. Despite this reduction, India remains among the top 20 investors in American debt, surpassing economies like Saudi Arabia and Germany.
This shift in investment strategy reflects a broader global trend where countries are diversifying their foreign exchange reserves to reduce their reliance on the US dollar and mitigate risks associated with dollar-denominated assets. Factors driving this trend include geopolitical tensions, trade disputes, and concerns about the US fiscal outlook.
The Reserve Bank of India (RBI) has been actively increasing its gold reserves as part of this diversification strategy. As of June 27, 2025, India's gold reserves reached 879.98 metric tonnes, a notable increase from 840.76 metric tonnes on June 28, 2024. The rise in gold reserves and the decline in US Treasury holdings indicate a deliberate effort to diversify forex reserves and reduce the risk of revaluation losses due to US-specific factors. Economist Gaura Sengupta from IDFC First Bank noted that India's holdings of UST reduced by $14.5 billion over one year, despite a decline in UST yields, suggesting a diversification of forex reserve holdings away from UST.
Madan Sabnavis, chief economist at Bank of Baroda, explained that the increasing buildup of gold reserves, accompanied by diversification in forex currency assets, is a trend seen in countries like India, China, and Brazil. He added that the outstanding stock of T-bills reflects dollar valuation amid volatility in the greenback witnessed in the last twelve months.
Despite lowering its US bond exposure, India's overall foreign exchange reserves remain strong, standing at $690 billion as of August 22, 2025. Nearly all of the country's Treasury holdings are part of this stockpile, ensuring that New Delhi still maintains a sizable dollar cushion even as it strengthens its gold position.
Globally, central banks now hold more gold than U.S. Treasuries, marking a significant shift in reserve asset allocation. Official gold holdings have reached 36,344 tonnes, valued at over $3.6 trillion, exceeding the estimated $3.8 trillion in foreign Treasury holdings. This trend is driven by sanctions risk awareness, U.S. debt concerns, and portfolio diversification strategies.
