India's foreign exchange reserves experienced a decline of $4.47 billion, reaching $688.10 billion for the week ending November 21, according to the Reserve Bank of India (RBI). This decrease follows a significant increase of $5.54 billion, which had brought the reserves to $692.57 billion in the week ending November 14. The recent drop is attributed to decreases in both gold reserves and foreign currency assets.
Gold reserves fell by $2.67 billion, bringing them to $104.18 billion. Foreign currency assets also experienced a dip of $169 million, settling at $560.60 billion. These assets, a major component of the reserves, include holdings of non-US currencies like the Euro, Pound, and Yen, and their dollar value fluctuates with exchange rates. The Special Drawing Rights (SDRs) edged down slightly, while India's reserve position with the International Monetary Fund (IMF) saw a marginal increase.
The RBI often intervenes in the foreign exchange market to manage volatility and ensure stability of the rupee. These interventions can lead to fluctuations in the forex reserves. The central bank has stated that the changes in reserves also occur because global currencies such as the Euro or Yen move against the US dollar.
Earlier in November, specifically the week ending November 7, the reserves had already dropped by $2.7 billion to $687.73 billion. This followed a previous dip of $5.6 billion. However, in the week ending November 14, the reserves saw a substantial increase, driven largely by a steep jump in the value of gold holdings, which rose by $5.327 billion to $106.857 billion.
The level of forex reserves is crucial for India's economy. They provide a buffer against external shocks, help stabilize the currency, and boost investor confidence. A healthy reserve level enables the nation to meet its international payment obligations. India's import cover remains strong, with reserves sufficient to finance over 11 months of imports.
Despite these strengths, India's reserves remain sensitive to global interest-rate movements and currency fluctuations, which can affect capital flows and external stability. The Indian rupee has faced challenges in 2025 due to factors such as high US tariffs, the war in Ukraine, and investor outflows. To stabilize the rupee, the RBI has been selling dollars from its reserves.
