India Forex Reserves Fall $4.9 Billion After Record High
India Forex Reserves Fall $4.9 Billion After Record High
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Key Points
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Foreign-currency assets fell by $2.4 billion to $645.8 billion, while gold reserves declined by $2.6 billion to $111.2 billion during the week ended September 11.
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India’s SDR holdings at the IMF rose by $39 million to $18.8 billion, and its reserve position with the IMF increased by $60 million to $4.9 billion.
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The RBI’s special swap measures had mobilised $136.4 billion in foreign-currency inflows by August 31. Although the FCNR(B) deposit window closed that day, external commercial borrowings and overseas foreign-currency bonds remained eligible until December 31, while banks could use the facility for deposits already contracted through September 11.
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Gaura Sen Gupta, chief economist at IDFC FIRST Bank, said the RBI had bought $1.2 billion and attributed much of the remaining decline to revaluation losses from dollar strength and higher U.S. yields, along with RBI dollar sales and sell-buy swaps.
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As of September 4, reserves were $94.599 billion above their end-March level and $87.438 billion higher than a year earlier, while gold holdings were $23.517 billion above their year-earlier level despite being below the end-March figure.
India's foreign-exchange reserves fell $4.9 billion to $780.8 billion in the week ended September 11, RBI data showed. This marked the first decline after 10 straight weeks of gains. The drop followed a massive $44.9 billion surge the prior week, driven by foreign-currency inflows under the RBI's swap program.
Despite the weekly pullback, India's reserves remain well above where they stood in March and a year ago. IDFC FIRST Bank chief economist Gaura Sen Gupta blamed the decline on a stronger dollar, higher U.S. yields, and RBI dollar sales. Gold reserves slipped $2.6 billion while foreign-currency assets fell $2.4 billion.
Record Inflows End After Ten-Week Rally
India's forex reserves had surged $44.9 billion the prior week—the largest jump on record. That spike came from foreign-currency inflows through the RBI's special swap window. According to RBI data, the swap program mobilized $136.4 billion in inflows by August 31. The FCNR(B) deposit window closed that day, but banks could continue using the facility for deposits contracted through September 11.
Dollar Strength and Gold Values Hit Hard
Foreign-currency assets dropped $2.4 billion to $645.8 billion. Gold reserves fell $2.6 billion to $111.2 billion. IDFC FIRST Bank economist Gaura Sen Gupta said the RBI bought only $1.2 billion of the lost value. The rest came from revaluation losses tied to a stronger U.S. dollar and higher yields. RBI dollar sales and swap transactions also weighed on holdings.
Reserves Still Sit Well Above Year-Ago Levels
As of September 4, reserves exceeded end-March levels by $94.6 billion. Year-over-year, reserves were $87.4 billion higher than a year earlier. Gold holdings jumped $23.5 billion compared to September 2023, even though they remain below the March 2024 peak. This cushion keeps India well-protected against external shocks and currency swings.
IMF Position and Other Reserve Components Grow
While main reserves fell, India's position at the IMF strengthened. SDR holdings rose $39 million to $18.8 billion. The reserve position at the IMF climbed $60 million to $4.9 billion. These smaller components offset some of the decline in foreign-currency assets and gold. Together, all components show India maintains a solid external buffer despite weekly volatility.
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