India’s foreign exchange (forex) reserves saw a sharp rebound of $3.51 billion in the week ended August 29, 2025, according to data released by the Reserve Bank of India (RBI). This follows a steep fall of $4.386 billion in the preceding week, which had dragged reserves down to $690.72 billion.
The recovery was largely driven by a jump in gold reserves, along with gains in foreign currency assets (FCA) and an improved reserve position with the International Monetary Fund (IMF).
Breakdown of Reserve Growth
- Foreign Currency Assets (FCA): Rose by $1.686 billion, reaching $583.94 billion. Movements also reflected valuation shifts in currencies such as the euro, pound, and yen.
- Gold Reserves: Surged by $1.766 billion to $86.77 billion, making gold the single-largest contributor to the week’s rebound.
- Special Drawing Rights (SDRs): Added $40 million, taking the total to $18.78 billion.
- IMF Reserve Position: Improved by $18 million, now standing at $4.75 billion.
RBI’s Strategic Tilt Toward Gold
Recent trends suggest the RBI is increasingly leaning on gold as a reserve asset while gradually trimming its exposure to US Treasury bills.
- India’s gold reserves climbed to 879.98 metric tonnes as of June 27, 2025, up from 840.76 tonnes a year earlier.
- Investments in US Treasury bills fell to $227 billion in June 2025, compared to $242 billion a year ago.
- Despite the decline, India remains among the top 20 global holders of US T-bills, ahead of countries like Saudi Arabia and Germany.
Why the Shift to Gold?
Gold has emerged as a preferred hedge for central banks worldwide amid global uncertainties, inflationary pressures, and geopolitical risks. By boosting its gold stockpile, the RBI is:
- Diversifying away from US fiscal and monetary policy risks.
- Reducing reliance on the dollar-dominated reserve system.
- Strengthening the resilience of India’s reserve portfolio.
Market Impact
The rise in reserves is expected to:
- Provide greater buffer against external shocks.
- Support the rupee amid global currency volatility.
- Enhance India’s financial stability in the face of rising global interest rates and capital flow fluctuations.
Summary
- India’s forex reserves rose $3.51 billion in the week ended Aug 29, 2025, reversing the prior week’s fall.
- Gold reserves (+$1.77 billion) were the biggest contributor, followed by gains in FCA, SDRs, and IMF reserves.
- RBI continues to diversify away from US T-bills while increasing its gold holdings.
- The shift reflects a global central bank trend of using gold as a hedge against inflation, geopolitical risks, and US policy exposure.
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