India’s Forex Reserves Dip $4.38 Billion to $690.72B

India’s foreign exchange reserves registered a decline of $4.38 billion, slipping to $690.72 billion for the week ending August 22, 2025, according to data released by the Reserve Bank of India (RBI). The fall comes after a recent surge in reserves, which had touched a record high of $704.88 billion in September 2024.

Breakdown of Reserve Components

1. Foreign Currency Assets (FCAs)

• The largest component of reserves, FCAs dropped by $3.65 billion, settling at $582.25 billion.
• FCA values are influenced not just by dollar holdings, but also by movements in other major currencies like the euro, pound, and yen.

2. Gold Reserves

• Increased by $665 million, standing at $66.58 billion during the reporting week.
• The rise indicates continued diversification into gold as a safe-haven asset.

3. Special Drawing Rights (SDRs)

• Declined by $46 million, now at $18.73 billion.

4. IMF Reserve Position

• Marginally reduced by $23 million, down to $4.73 billion.

Recent Trends in Reserves

• In the previous week (ending August 15, 2025), forex reserves had increased by $1.48 billion to $695.10 billion.
• The current fall reflects adjustments in currency assets and international market movements.
• India’s reserves still remain among the highest globally, providing a significant buffer against external shocks.

RBI’s Role in Forex Market

• The RBI frequently intervenes in the forex market to maintain rupee stability and control excessive volatility. Such interventions include:
• Selling dollars to prevent sharp rupee depreciation.
• Liquidity operations aimed at ensuring smooth market conditions.
• Importantly, RBI emphasizes that interventions are not targeted at fixing a specific exchange rate, but to maintain orderly market operations.

Significance of Strong Forex Reserves

Forex reserves are critical for,

• Ensuring currency stability during external shocks.
• Supporting import payments, especially for crude oil and essential commodities.
• Maintaining investor confidence in India’s economic fundamentals.
• Providing a cushion against global trade disruptions, tariff tensions, and capital outflows.