India’s foreign exchange reserves saw a moderate rise for the week ended December 12, 2025, increasing by $1.68 billion to $688.94 billion, according to data released by the Reserve Bank of India (RBI). This uptick in reserves is primarily attributed to the growth in foreign currency assets (FCA), which form the largest portion of India’s reserves.

Breakdown of Reserves

India’s forex reserves typically comprise four major components:

1. Foreign Currency Assets (FCA):

   • The largest component, denominated in US dollars, euros, pounds sterling, and yen.

   • For the week ended December 12, FCA rose by $906 million to $557.787 billion, reflecting capital inflows, central bank operations, and valuation changes.

2. Gold Reserves:

   • India’s gold holdings act as a hedge against currency fluctuations.

   • The value of gold is marked to market based on global gold prices.

3. Special Drawing Rights (SDRs):

   • SDRs are international reserve assets allocated by the IMF.

   • India’s SDR holdings provide an additional layer of liquidity.

4. Reserve Position with IMF:

   • India maintains a reserve account with the International Monetary Fund, which can be used for emergency liquidity support.

Factors Contributing to the Rise

1. Capital Inflows:

   • Foreign institutional investments (FIIs) in equities and bonds contributed positively.

   • Strong demand for Indian bonds and a stable macroeconomic outlook boosted forex reserves.

2. Rupee Stability Measures:

   • RBI interventions in the currency market to smoothen volatility have impacted foreign currency holdings.

3. Trade Balances:

   • Despite external challenges, India’s export growth and remittances support reserve accumulation.

Significance of High Forex Reserves

1. External Stability:

   • A high level of reserves ensures adequate cover for imports (India’s reserves cover several months of imports).

   • It supports repayment of external debt and foreign obligations.

2. Rupee Support:

   • Large forex reserves provide confidence to investors and help maintain stability in the Indian rupee.

3. Economic Credibility:

   • Strong reserves enhance India’s standing in global financial markets, making it easier to raise funds if needed.

4. Cushion Against Volatility:

   • Reserves act as a buffer against sudden capital outflows or external shocks.

Recent Trends in Reserves

• In 2025, India’s forex reserves have fluctuated due to global monetary tightening, oil price volatility, and trade dynamics.

• The gradual accumulation trend reflects strong export performance, remittances, and investment inflows.

Conclusion

India’s foreign exchange reserves have once again demonstrated resilience, rising to $688.94 billion as of December 12, 2025. The $1.68 billion increase, driven primarily by foreign currency assets, reinforces India’s capacity to manage external obligations, currency stability, and global investor confidence.

With sustained capital inflows, remittances, and prudent central bank management, India is likely to maintain healthy reserve levels, supporting macroeconomic stability and long-term financial security.

Join our Telegram Channel for Latest News and Regular Updates.

Start your Mutual Fund Journey  by Opening Free Account in Asset Plus.

Start your Stock Market Journey and Apply in IPO by Opening Free Demat Account in Choice Broking FinX.