Foreign currency assets drop while gold value surges higher.
The country's financial war chest has seen another dip, marking a continued downward trend in recent weeks. According to the latest statistics released by the Reserve Bank of India (RBI), India's forex reserves decreased by USD 1.877 billion for the week concluding on November 28. This brings the total holding to USD 686.227 billion.
This follows a significant decline in the preceding week (ending November 21), where the reserves plummeted by over USD 4.4 billion due to a slump across both currency and gold assets.
Understanding the Decline and the Bright Spot
The 'Weekly Statistical Supplement' published by the central bank highlights that the primary factor dragging the total reserves down was the drop in Foreign Currency Assets (FCA). As the largest component of the forex kitty, the FCA fell by USD 3.569 billion, settling at USD 557.031 billion.
However, the data revealed a silver lining—or rather, a golden one. Contrary to the currency assets, India’s gold reserves witnessed a healthy appreciation. The value of gold holdings jumped by USD 1.613 billion, reaching a total of USD 105.795 billion. This surge is largely attributed to the global price appreciation of the yellow metal, which investors view as a safe haven during times of international market uncertainty.
Other Components and Historical Context
Beyond gold and FCA, the RBI data pointed to minor gains in other areas. Special Drawing Rights (SDRs) rose by USD 63 million to reach USD 18.628 billion. Additionally, India’s reserve position with the International Monetary Fund (IMF) saw a marginal increase of USD 16 million, taking it to USD 4.772 billion.
To put these numbers in perspective, India’s accumulation of reserves has been quite dynamic over the last few years. While 2022 saw a cumulative drop of USD 71 billion, the country bounced back in 2023 by adding nearly USD 58 billion to the kitty. The year 2024 saw a modest rise of over USD 20 billion. Despite the recent weekly dips, the cumulative growth for the calendar year 2025 so far stands at approximately USD 48 billion.
Why Does the RBI Hold These Reserves?
These foreign exchange reserves—comprising major global currencies like the US Dollar, Euro, Pound Sterling, and Yen—are crucial tools for the central bank. The RBI utilizes this kitty strategically to manage the liquidity of the Indian Rupee. By selling dollars when the Rupee is weak and buying them when it is strong, the central bank prevents drastic volatility in the domestic currency market.
