India's forex reserves dip by $2.1 billion after hitting all-time high

India's forex reserves fell by USD 2.119 billion to USD 723.608 billion for the week ending Feb 20, down from a recent all-time high. The dip was attributed to a drop in both foreign currency assets and the country's gold reserves.

India's foreign exchange reserves dipped USD 2.119 billion in the week that ended February 20 to USD 723.608 billion, after having reached a new all-time high recently, according to the Reserve Bank of India's latest data.

Foreign exchange reserves dipped in the latest week, driven by a drop in gold reserves and foreign currency assets. Over the past few weeks, the forex kitty has been largely in an uptrend. Foreign exchange reserves touch record high of USD 725.727 billion in February.

Components of the Forex Dip

For the reported week (that ended February 20), India's foreign currency assets (FCA), the largest component of foreign exchange reserves, stood at USD 572.564 billion, down USD 1.039 billion. The RBI data showed that gold reserves currently stood at USD 127.489 billion, down USD 977 million from the previous week.

RBI Maintains Confident Outlook

After the latest monetary policy review meeting last month, the RBI had said that the country's foreign exchange reserves were sufficient to cover more than 11 months of merchandise imports.

RBI said India's external sector remains resilient, and it was confident of comfortably meeting the country's external financing requirements.

Yearly Forex Reserve Trends

According to data, the forex kitty has increased by about 56 billion in 2025. In 2024, reserves rose by just over USD 20 billion.

In 2023, India added around USD 58 billion to its foreign exchange reserves, in contrast to a cumulative decline of USD 71 billion in 2022.

Understanding Forex Reserves and RBI's Role

Foreign exchange reserves, or forex reserves, are assets held by a nation's central bank or monetary authority, primarily in reserve currencies such as the US dollar, with smaller portions in the Euro, Japanese yen, and Pound Sterling.

The RBI often intervenes by managing liquidity, including selling dollars, to prevent a steep depreciation of the rupee. The RBI strategically buys dollars when the Rupee is strong and ideally sells when it weakens. (ANI)

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