India's foreign exchange reserves experienced a notable shift in the week ending September 26, 2025, according to the Reserve Bank of India (RBI). While the overall forex reserves declined, gold reserves saw a substantial increase. The total foreign exchange reserves stood at $700.236 billion, a decrease of $2.334 billion from the previous week's $702.57 billion.
Decline in Foreign Currency Assets
The primary reason for the drop in total reserves was a decrease in foreign currency assets (FCA), which are the largest component of the reserves. FCA fell by $4.393 billion to $581.757 billion. It's important to note that FCAs are expressed in dollar terms, and their value is affected by the appreciation or depreciation of non-US currencies like the Euro, Pound, and Yen, which are held in India's reserves.
Gold Reserves Rise Significantly
In contrast to the decline in FCAs, India's gold reserves experienced a significant increase. Gold reserves rose by $2.238 billion, reaching $95.017 billion. This increase reflects the central bank's strategic shift, influenced by global economic uncertainty and geopolitical tensions. As of Q2 2025, the RBI's gold reserves stood at 880 tonnes.
Other Components of Forex Reserves
Apart from FCAs and gold reserves, Special Drawing Rights (SDRs) and India's reserve position with the International Monetary Fund (IMF) also contribute to the nation's forex reserves. During the week ending September 26, 2025, SDRs decreased by $90 million to $18.789 billion. India's reserve position with the IMF also declined by $89 million to $4.673 billion.
Overall Forex Reserves Sufficiency
Despite the recent decline, India's forex reserves remain at a substantial level. RBI Governor Sanjay Malhotra stated that the forex reserves are sufficient to cover 11 months of merchandise imports. The reserves also cover 95.4% of the country’s outstanding external debt as of the end of March 2025.
RBI's Role in Forex Management
The RBI actively manages the forex market to maintain stability. The central bank intervenes through liquidity operations, including the sale of dollars, to curb excessive volatility in the rupee. These interventions aim to ensure orderly trading conditions without targeting a fixed exchange rate.
India's Global Standing
India holds a significant position globally in terms of forex reserves. The country ranks as the fourth-largest holder of foreign exchange reserves, following China, Japan, and Switzerland.
