India’s Forex Reserves Plunge $6.9B: Biggest Fall in 12 Weeks

India’s foreign exchange reserves fell by $6.92 billion to $695.36 billion in the week ending October 24, 2025. This was the most significant one-week drop in 12 weeks and a sign that the world’s gold and currency markets are becoming more volatile again. Below is a complete analysis of the development:

Overview of the Decline

The Reserve Bank of India (RBI) said that reserves were $695.36 billion, a significant drop from $702.28 billion the previous week. This drop is the opposite of the substantial gain the week before, when gold reserves rose sharply. The most recent drop is now the largest since August, indicating that outside forces are growing stronger.

Breakdown of Reserve Components

• Foreign Currency Assets (FCA): The FCA segment, which has most of the reserves, fell by $3.86 billion to $566.55 billion. Changes in the dollar and other major currencies, as well as actions by central banks, often lead to changes here.
• Gold Reserves: The value of gold held dropped by $3.01 billion, bringing the total gold reserves down to $105.54 billion.
• Special Drawing Rights (SDR): The value of SDR holdings went down by $58 million to $18.66 billion.
• Reserve Position with IMF: India’s reserve position with the International Monetary Fund (IMF) went up by only $6 million during this reporting period, bringing the total to $4.61 billion.
• Causes of the Decline

Several factors have combined to pressure India’s forex reserves:

• US Dollar Strength: A sharp rise in the US dollar’s value relative to other major currencies has lowered the value of non-dollar reserves.
• Gold Price Corrections: The global decline in gold prices reduced the value of India’s gold reserves in dollars.
• Market Intervention: The RBI is said to have stepped in to stabilize the rupee and curb volatility, leading to a drop in reserves.
• Global Bond Yields: As US bond yields rise and the US Federal Reserve tightens monetary policy, capital is flowing out of emerging markets like India.
• Foreign Portfolio Outflows: Foreign portfolio investors continually adjust their allocations, reallocating capital in response to shifts in global conditions and return expectations.

RBI’s Response and Policy Position

The RBI does not have a set exchange rate target and intervenes only to maintain market order and prevent sudden drops in the rupee’s value. This optional method aims to lower exchange rate volatility without going against larger market trends.

Global and Local Implications

• Import Cover and Economic Buffer: Even though they fell this week, India’s reserves are still strong enough to cover a large share of imports and other debts. This buffer helps keep the country’s finances stable.
• Investor Sentiment: If significant declines persist, they could make investors less confident, especially amid uncertainty outside the market and changing commodity prices.
• Outlook: The situation is still evolving, and the central bank is keeping a close eye on developments and is ready to act if necessary.

Conclusion

India’s $6.92 billion drop in forex reserves reflects volatile global currency and commodity markets, compounded by strategic market interventions and external economic pressures. While the reduction raises short-term concerns, the nation’s overall reserve position remains strong, and the RBI continues to navigate evolving global headwinds with measured policy actions.

Key Data Snapshot: