SDG 8: Decent Work and Economic Growth | SDG 17: Partnerships for the Goals
Institutions: Reserve Bank of India (RBI) | Ministry of Finance
The Reserve Bank of India (RBI) released its 45th Half-Yearly Report on Management of Foreign Exchange Reserves, covering the period April to September 2025. The report confirms a robust strengthening of India’s external buffers, with reserves surging past a new milestone.
Key Highlights on Reserve Movement and Growth:
Total Reserves: India’s foreign exchange reserves increased significantly, rising from USD 668.33 billion at end-March 2025 to USD 700.09 billion at end-September 2025.
Growth Drivers: The total increase wasn’t just from new money flowing in. USD 4.5 billion came from genuine economic transactions (like trade surpluses or investments, measured on a Balance of Payments basis). The largest boost came from a massive USD 25.3 billion “valuation gain” during the April-June 2025 quarter. This “gain” is not new money, but simply the dollar value of the reserves increasing because the US Dollar weakened against other major currencies (like the Euro or Yen) in which the RBI holds assets..
External Position Improvement: The country’s overall financial balance with the rest of the world, called the Net International Investment Position (Net IIP), improved substantially. This metric compares India’s total assets held abroad against its total liabilities owed to the world.
The negative gap shrank significantly from (-) USD 366.8 billion (end-June 2024) to (-) USD 312.8 billion (end-June 2025), signaling that India’s external financial standing is much more robust.
Composition and Management of Reserves (End-Sep 2025):
Gold Holdings: The RBI held 880.18 metric tonnes of gold. The value of gold reserves rose significantly, increasing its share in the total foreign exchange reserves from 11.70% (end-March 2025) to about 13.92% (end-September 2025).
Currency Assets Deployment: The Foreign Currency Assets (FCA) are maintained in a multi-currency portfolio. Their deployment pattern shows a continued focus on sovereign instruments:
84.52% (USD 489.54 billion) was invested in securities (e.g., government bonds).
7.96% was deposited with other central banks and the Bank for International Settlements (BIS).
7.52% was deposited with commercial banks overseas.
Adequacy and Risk Indicators:
Import Cover: Reserves adequacy remains high, covering imports for 11.4 months (as of end-June 2025).
Short-Term Debt: The ratio of short-term debt (original maturity) to reserves decreased from 20.1% to 19.4%.
Volatile Flows: The ratio of volatile capital flows (including short-term debt) to reserves decreased from 69.0% to 66.6%.
Risk Management Priority: The primary objectives guiding the management of reserves remain, in order of priority: Safety, Liquidity, and Return.
The substantial growth in foreign exchange reserves to over USD 700 billion, coupled with improving adequacy ratios and a shrinking negative Net IIP gap, signals a significant strengthening of India’s external sector resilience. This strong buffer bolsters the RBI’s ability to conduct effective exchange rate management and provides robust stability against potential global economic or geopolitical shocks.
What are Foreign Exchange Reserves, and why are they important for a country?→ Foreign Exchange Reserves (Forex Reserves) are external assets held by a central bank, primarily in the form of foreign currencies (like the US Dollar), gold, Special Drawing Rights (SDRs), and reserve position with the IMF. These reserves are critical for a country’s economic stability, as they allow the central bank to manage the value of the domestic currency, finance essential imports, and provide confidence to global financial markets in times of economic distress.
Follow the full report here: Half Yearly Report on Management of Foreign Exchange Reserves: April - September 2025