Why in News?
India’s foreign exchange (forex) reserves rose to a record $729.33 billion in the week ended 21 August 2026, according to data released by the Reserve Bank of India (RBI).
Key Highlights
- India’s forex reserves reached a record $729.33 billion as of 21 August 2026.
- Reserves increased by $12.4 billion in the latest week.
- Foreign Currency Assets (FCA) rose by around $9.5 billion.
- The value of India’s gold reserves increased by around $2.8 billion.
- Reserves have risen for eight straight weeks, gaining nearly $63 billion.
- The RBI received nearly $73 billion through measures introduced to encourage overseas dollar inflows.
- Around $65 billion of this amount came from NRI deposits.
What Led to the Rise in Forex Reserves?
- A major reason behind the recent increase was the RBI’s measures to bring more foreign currency into India.
- In June 2026, the RBI introduced measures to encourage banks and public-sector entities to raise funds from overseas. These included easier and cheaper hedging facilities for overseas borrowing and a facility that allowed banks to raise foreign currency deposits.
- These measures led to a large inflow of dollars into the Indian banking system.
- The RBI received nearly $73 billion through these schemes between 5 June and 21 August, with NRI deposits accounting for around $65 billion.
What are Forex Reserves?
- Foreign exchange reserves, commonly called forex reserves, are external assets held by a country's central bank in foreign currencies and other internationally accepted reserve assets.
- In India, forex reserves are managed by the Reserve Bank of India (RBI). They act as a financial cushion for the country and help the RBI manage pressure on the balance of payments, meet import-related requirements during periods of stress and prevent excessive volatility in the rupee.
- Forex reserves are therefore not simply dollars kept in the RBI. They are made up of different foreign assets and international reserve instruments.
What is Included in India’s Forex Reserves?
India’s forex reserves have four main components:
- Foreign Currency Assets (FCA): Foreign Currency Assets form the largest part of India’s forex reserves. They consist of assets held in major foreign currencies such as the US dollar, euro, pound sterling and Japanese yen.
- Gold Reserves: The RBI also holds gold as part of India's reserves. Gold provides diversification and acts as a reserve asset during periods of global uncertainty.
- Special Drawing Rights (SDRs): Special Drawing Rights (SDRs) are international reserve assets created by the International Monetary Fund (IMF). SDRs are not a currency in the usual sense. Their value is based on a basket of major currencies and they can be exchanged among IMF members for freely usable currencies.
- Reserve Tranche Position (RTP): The Reserve Tranche Position is the portion of India's quota with the IMF that can be accessed when required. It is included in India's forex reserves because it represents a readily available international liquidity resource.