What Is India’s Forex Reserve Composed Of?

According to the report, as of May 16, 2025, Indias total forex reserves amounted to $690,617 million. These reserves are made up of four key components:

Foreign Currency Assets

Gold Reserves

Special Drawing Rights

Reserve Position in the International Monetary Fund

Foreign Currency Assets (FCAs)

• Amount: $581,373 million
• Share: ~84.2% of total reserves

FCAs comprise the bulk of Indias forex reserves. These include:

• Cash and bank deposits in foreign currencies (primarily USD, EUR, GBP, JPY)
• Government securities and bonds issued by sovereigns or supranational entities
• Treasury bills and other highly liquid assets

Gold Reserves

• Amount: $86,337 million
• Share: ~12.5% of total reserves

Gold serves as a traditional safe-haven asset. India holds its gold partly in domestic vaults and partly with international custodians.

Special Drawing Rights (SDRs)

• Amount: $18,532 million
• Share: ~2.7% of total reserves

SDRs are international reserve assets created by the IMF. They are not a currency but a potential claim on freely usable currencies.

Reserve Position in the IMF

• Amount: $4,374 million
• Share: ~0.6% of total reserves

This represents Indias quota-based reserve position in the IMF, which can be drawn upon if necessary.

Why Composition Matters

• Risk Management: Diversification across asset types and currencies mitigates concentration risk.
• Policy Flexibility: Different components offer varying degrees of liquidity and stability.
• Market Confidence: A robust reserve mix enhances sovereign credit ratings and investor trust.

Q&A Section

Q1: What percentage of Indias forex reserves is held in foreign currency assets?

According to the report, approximately 84.2%, making FCAs the largest component of Indias reserves.

Q2: Why does India hold gold as part of its reserves?

Gold acts as a hedge against inflation and provides an extra layer of security during global financial uncertainty.

Q3: How significant is Indias IMF reserve position?

At around 0.6% of total reserves, it‘s a smaller yet strategic buffer reflecting India’s IMF quota and voting power.

Q4: Can the RBI use these reserves to defend the rupee?

Yes. The RBI can sell foreign currency assets to support the rupee or purchase them to manage liquidity, leveraging its sizeable FCA holdings.