India’s foreign exchange reserves rose sharply by $6.992 billion to reach $692.721 billion in the week ending 23 May, according to official data released by the Reserve Bank of India (RBI).
This increase brings the forex reserves close to their all-time high of $704.89 billion, recorded in September 2024.
Experts estimate that India’s foreign exchange reserves currently cover around 10 to 12 months of projected imports, providing a strong buffer against external shocks.
The RBI data reveals that foreign currency assets (FCA)—the largest component of the reserves—stood at $586.167 billion.
Meanwhile, gold reserves were valued at $83.582 billion.
Gold’s Rising Share In Forex Reserves
Globally, central banks have increasingly accumulated gold as a safe-haven asset, and India follows this trend.
Since 2021, the Reserve Bank of India has nearly doubled the share of gold in its foreign exchange reserves, reflecting a strategic diversification of its holdings.
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In 2023, India added approximately $58 billion to its forex reserves, reversing a cumulative decline of $71 billion seen in 2022.
The upward trend continued in 2024, with reserves increasing by just over $20 billion.
Understanding India’s Forex Management
Foreign exchange reserves consist mainly of assets held in reserve currencies such as the US dollar, with smaller portions in the euro, Japanese yen, and pound sterling.
The RBI actively manages these reserves to stabilise the rupee.
Typically, the central bank buys dollars when the rupee is strong and sells dollars to support the currency when it weakens, thereby controlling volatility and ensuring liquidity in the foreign exchange market.
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