India’s Forex Reserves Surge To Record $729 Billion, Powered By $65.4 Billion FCNR Deposits

India’s foreign exchange reserves have climbed to a record $729.33 billion, strengthening the country’s ability to withstand external shocks even as the rupee remains under pressure. The latest milestone marks eight consecutive weeks of gains and takes reserves beyond the previous record of $728.49 billion reached in February.

The increase was led by foreign currency assets, which rose by about $9.48 billion to $591.3 billion in the week ended August 21. Gold reserves added another $2.8 billion to reach $114.2 billion, while Special Drawing Rights stood at $18.9 billion and the IMF reserve position at $4.9 billion. The latest figures provide more than 11 months of import cover.

A major factor behind the recent buildup has been the RBI’s foreign-currency mobilisation drive launched in June. By August 21, the measures had mobilised around $72.85 billion, including $65.4 billion through FCNR(B) deposits, $4.86 billion through overseas foreign-currency borrowings and $2.59 billion through external commercial borrowings. The facility was subsequently closed early after attracting funds far beyond initial expectations.

However, the $72.85 billion should not be mistaken for money permanently added to reserves. Much of the mobilisation came through foreign-currency deposits and borrowings, which also create liabilities. The RBI’s swap mechanism additionally involves taking on exchange-rate risk. Its forward dollar liabilities stood at about $103.3 billion at end-June, making the headline reserve figure more complex than a simple pool of freely spendable dollars.

The distinction is particularly important for the rupee. It had fallen to around ₹96.96 against the dollar in May, prompting measures to strengthen foreign-currency liquidity. Even with reserves now at a record, strong dollar demand from imports, including oil, continues to influence the currency. The RBI has been intervening to contain excessive volatility rather than targeting a particular exchange rate.

The scale of the transformation remains striking. From reserves of roughly $1 billion during the 1991 balance-of-payments crisis, India now possesses a vast external buffer. Yet the latest record also shows that the strength of that buffer depends not only on its size, but on the quality, liquidity and obligations attached to the reserves behind the headline number.