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.