Forex Reserve / India Surpasses Russia, Becomes Fourth Largest Forex Reserve Holder

Mumbai, Sep 12: India’s foreign exchange reserves have soared to unprecedented levels, propelling the country into the global top four. A record wave of dollar inflows, driven by the Reserve Bank of India’s special FCNR(B) deposit scheme, has transformed India’s external position.

The surge not only strengthens the nation’s financial buffer but also signals the resilience of its economy at a time of global uncertainty.

According to Bloomberg data, India’s forex reserves jumped by $44.9 billion to a record $785.7 billion during the week ended September 4. This milestone pushed India ahead of Russia, leaving only China, Japan, and Switzerland with larger reserves.

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The surge came despite a decline in the gold reserves component, which fell by $2.59 billion to $113.81 billion as global gold prices dropped.

Analysts note that the increase in foreign exchange reserves reflects strong economic fundamentals and provides the RBI with greater flexibility to stabilize the rupee during volatility.

A robust forex kitty allows the RBI to intervene in both spot and forward currency markets by releasing dollars to prevent sharp depreciation of the rupee.

Meanwhile, the central bank has announced a Rs 1 lakh crore open market operation (OMO) sale of government bonds to absorb excess liquidity created by the inflows. The securities will be sold in three tranches: Rs 50,000 crore on September 17, Rs 25,000 crore on September 21, and Rs 25,000 crore on September 28. Auctions will follow the multiple‑price method using a multi‑security format.

Earlier this week, the RBI raised over Rs 3.53 lakh crore through an overnight Variable Rate Reverse Repo (VRRR) auction with a one‑day tenor to drain surplus cash. A VRRR auction is a monetary policy tool used to absorb excess liquidity and maintain financial stability.

The RBI’s special dollar‑rupee forex swap facility for FCNR(B) deposits, Overseas Foreign Currency Borrowings (OFCB), and External Commercial Borrowings (ECB), launched on June 8, has driven an unprecedented inflow of $73 billion in less than 11 weeks. The response was so strong that the RBI advanced the closure of the FCNR(B) window from September 30 to August 31, having already achieved its objective ahead of schedule.

India’s record reserves now stand as a buffer against global uncertainties, underscoring the strength of its external sector and the effectiveness of RBI’s liquidity management measures.