India’s forex reserves dip by $5.6 billion, still near record high

India’s foreign exchange reserves declined by about ₹49,900 crore (USD 5.623 billion) to ₹61.17 lakh crore (USD 689.733 billion) in the week ended October 31, 2025, according to the latest data released by the Reserve Bank of India (RBI). The fall was mainly driven by drops in both foreign currency assets (FCAs) and gold reserves, as shown in the RBI’s Weekly Statistical Supplement.

Despite the recent dip, India’s forex kitty remains close to its all-time high of ₹62.55 lakh crore (USD 704.89 billion), recorded in September 2024. Over the past month, reserves have shown a slight downtrend, except for one week of increase. During the reported week, foreign currency assets, the largest component of forex reserves, stood at ₹50.11 lakh crore (USD 564.591 billion), down by ₹17,350 crore (USD 1.957 billion). The fall in FCAs is mainly attributed to the RBI’s intervention in the forex market to manage volatility in the rupee. When the rupee comes under downward pressure, the central bank typically sells dollars from its reserves to stabilize the currency, which directly impacts FCA levels.

Gold reserves also fell sharply by ₹33,780 crore (USD 3.810 billion), standing at ₹9.02 lakh crore (USD 101.726 billion). Analysts say this decline stems largely from valuation effects rather than physical sales. Global gold price fluctuations and a stronger US dollar reduced the dollar value of India’s gold holdings. Recent volatility in bullion markets, amid geopolitical tensions and shifting investment sentiment, added to the dip.

In addition, a strong US dollar against major global currencies such as the Euro, Yen, and Pound Sterling caused a valuation loss in non-dollar assets, further lowering the overall reserve value. Movements in global bond yields and changes in risk sentiment also influenced the valuation of the RBI’s foreign securities portfolio. While US 10-year Treasury yields recently eased to around 4.09%, earlier increases in yields had temporarily reduced the market value of dollar-denominated bonds. Meanwhile, India’s current-account pressures owing to higher import bills, moderate export growth, and fluctuations in foreign portfolio investor (FPI) activity contributed to modest outflows.

After the latest monetary policy review, RBI Governor Sanjay Malhotra stated that India’s foreign exchange reserves remain sufficient to cover “more than 11 months of merchandise imports,” underscoring the strength of the country’s external sector. India added about ₹5.14 lakh crore (USD 58 billion) to its reserves in 2023, after a ₹6.29 lakh crore (USD 71 billion) decline in 2022. In 2024, reserves rose by over ₹1.77 lakh crore (USD 20 billion), and so far in 2025, the forex kitty has increased by nearly ₹3.54 lakh crore (USD 40 billion), reflecting a broadly resilient external position despite short-term fluctuations.

The current decline is largely short-term and valuation-driven, not due to any structural weakness. If global conditions stabilise, the rupee steadies, and commodity prices moderate, reserves could bounce back within a few months. Given India’s robust external position, consistent capital inflows, and policy management by the RBI, forex reserves are expected to remain above ₹60–62 lakh crore (USD 680–700 billion) in the near term.

Foreign exchange reserves, maintained by the RBI, include assets such as foreign currencies, gold, Special Drawing Rights (SDRs), and the country’s reserve position in the IMF. The RBI actively manages these assets buying dollars when the rupee is strong and selling when it weakens to maintain stability in the foreign exchange market.

This has nuanced implications for both importers and exporters, as well as for the rupee’s near-term trajectory. For import-dependent industries such as energy, electronics, and manufacturing, a dip in reserves signals limited headroom for the Reserve Bank of India (RBI) to intervene aggressively in the currency market. If the rupee weakens further against the US dollar, importers could face higher costs for raw materials and finished goods, thereby increasing input prices and potentially fueling imported inflation. This could tighten profit margins and raise working capital requirements for companies that rely heavily on overseas supplies.

For exporters, however, a modest depreciation in the rupee can offer short-term advantages by improving price competitiveness in global markets, particularly for sectors such as information technology, pharmaceuticals, and textiles. Yet, excessive volatility in the exchange rate can complicate export contracts, hedging decisions, and foreign currency debt management. From a broader perspective, though the recent decline in reserves reflects valuation effects rather than structural weakness, it may keep the rupee under mild pressure in the short run. Nonetheless, India’s sizeable reserve buffer still near $690 billion along with steady capital inflows and prudent policy management by the RBI, should anchor confidence and keep the rupee largely stable within the 83–84.5 per dollar range in the coming months.