Context
India’s foreign exchange reserves rose by a record $44.903 billion to an all-time high of $785.706 billion in the week ended September 4, 2026. The sharp rise followed increased forex inflows after RBI’s concessional forex-swap measures.
Explanation
- Forex reserves are external assets held and managed by the Reserve Bank of India (RBI).
- They comprise Foreign Currency Assets (FCA), gold reserves, Special Drawing Rights (SDRs) and the Reserve Tranche Position (RTP) with the IMF.
- FCA, the largest component, includes assets denominated in currencies such as the US dollar, euro, pound sterling and Japanese yen, though reserves are reported in US dollars.
- Reserves provide a buffer for imports, external debt payments and balance-of-payments shocks.
- RBI can sell dollars and buy rupees to contain excessive rupee depreciation; such intervention can reduce forex reserves.
- Conversely, capital inflows, RBI dollar purchases, forex swaps and asset revaluation can increase reserves.
- SDR is an international reserve asset created by the IMF and is not a currency.
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