India’s Forex Reserves Fall for Fourth Week, Down About $50 Billion From September Peak

India’s foreign exchange reserves fell for a fourth consecutive week to $734.6 billion as of October 2, roughly $51 billion below the record $785.71 billion reached on September 4. The decline comes as the Reserve Bank of India (RBI) has been intervening in the foreign-exchange market to manage pressure on the rupee while elevated oil prices, higher US Treasury yields and foreign portfolio outflows continue to weigh on the currency.

The drawdown does not mean that India has simply spent $51 billion defending a fixed rupee level. Reserve movements also reflect valuation changes in foreign-currency assets and gold. However, the RBI has acknowledged using dollar sales and sell/buy foreign-exchange swaps as part of its broader effort to manage currency volatility and domestic liquidity.

Key takeaways

• India’s forex reserves stood at $734.6 billion on October 2, 2026.
• Reserves have fallen for four consecutive weeks.
• The latest level is about $51 billion below the September 4 peak of $785.71 billion.
• The rupee fell nearly 0.5% on October 7 to ₹96.8450 per dollar, close to its record low of ₹96.96.
• RBI intervention includes spot dollar sales and sell/buy FX swaps.
• The previous three weekly declines totalled about $38.15 billion, including an $18.34 billion fall in the week ended September 25.
• Foreign-currency assets fell $15.57 billion in the September 25 week, while gold reserves declined $2.59 billion.
• The RBI says the current reserve stock still provides around 11 months of import cover and covers about 94.4% of external debt.
• High crude prices, elevated US bond yields and foreign portfolio flows remain key external risks.
• The reserve decline comes alongside the RBI’s first repo-rate increase in nearly four years, taking the policy rate to 5.50%.

India’s forex reserves have fallen sharply from the September record

India entered September with an unusually large foreign-exchange reserve buffer.

Reserves reached a record $785.706 billion in the week ended September 4. That increase was partly boosted by large foreign-currency inflows generated through the RBI’s concessional FCNR(B) deposit swap arrangement.

The subsequent reversal has been rapid.

By September 18, reserves had fallen to $765.9 billion. They then dropped another $18.34 billion in the week ended September 25 to $747.56 billion. The latest figure of $734.6 billion as of October 2 means the country has lost roughly $51 billion from its early-September peak.

The four consecutive weekly declines therefore represent a significant reversal from the reserve accumulation seen earlier in the year.

But the headline decline needs to be interpreted carefully.

Foreign-exchange reserves are not equivalent to a cash account from which the central bank simply withdraws dollars every time the rupee weakens.

Why forex reserves are falling

There are two broad forces behind the recent movement.

The first is foreign-exchange market intervention.

When the rupee comes under excessive downward pressure, the RBI can sell dollars and receive rupees in exchange. Increasing dollar supply in the market can help smooth currency movements and reduce disorderly volatility.

The second is valuation movement.

India’s reserves contain assets denominated in currencies other than the US dollar, including the euro, pound and yen. When those currencies move against the dollar, the value of those assets expressed in US-dollar terms changes even if the RBI has not bought or sold them.

Gold prices also affect the dollar value of India’s reserves.

The RBI therefore does not attribute every weekly reserve movement to intervention.

In the week ended September 25, for example, foreign-currency assets fell $15.57 billion while gold reserves declined $2.59 billion. Analysts said part of the decline reflected actual dollar sales and part reflected valuation effects.

That distinction is important because the roughly $51 billion fall since the September peak should not be described as $51 billion of direct RBI spending on defending the rupee.

RBI is intervening as the rupee approaches record lows

The reserve decline is happening alongside increasing pressure on the Indian currency.

The rupee fell nearly 0.5% on October 7 to ₹96.8450 per US dollar, approaching its record low of ₹96.96.

That weakness has persisted despite RBI intervention.

The central bank’s objective is not necessarily to defend a particular exchange-rate number. Instead, RBI Governor Sanjay Malhotra said the central bank would facilitate an orderly adjustment of the exchange rate while curbing excessive volatility.

That distinction matters.

A central bank can allow a currency to depreciate gradually while using its reserves to prevent sudden, disorderly movements.

In other words, intervention can slow the speed of depreciation without necessarily reversing the underlying direction of the currency.

Oil is adding pressure to India’s external position

One of the biggest challenges facing the rupee is the rise in international crude prices.

India imports the majority of its crude oil requirements. When oil prices rise sharply, Indian importers need more dollars to purchase the same physical quantity of energy.

That increases demand for dollars and can put additional downward pressure on the rupee.

The latest global oil shock has been particularly important because geopolitical tensions have pushed Brent crude above $100 a barrel at various points.

Higher oil prices also create a second problem.

If imported energy becomes more expensive, India’s trade deficit can widen, increasing the country’s external financing requirement.

The result can be a difficult combination for the currency: greater dollar demand from importers at the same time that global investors become more cautious about emerging-market assets.

US Treasury yields are another pressure point

The dollar is also benefiting from higher US interest rates and Treasury yields.

The US 10-year Treasury yield recently moved to around 5.34%, its highest level since 2002, according to Reuters.

Higher US yields can make dollar-denominated assets relatively more attractive to international investors.

For emerging markets such as India, that can increase the cost of attracting and retaining foreign capital.

The effect does not mean investors automatically withdraw from India whenever US yields rise. But when higher yields coincide with geopolitical uncertainty, elevated oil prices and a stronger dollar, the pressure on emerging-market currencies can become more pronounced.

That is the environment India is currently facing.

Foreign portfolio outflows are complicating the picture

Foreign portfolio investors have also been cautious.

According to the RBI’s latest policy assessment, net FPI outflows between April and October 5 stood at about $10.3 billion.

That headline number needs some context because portfolio flows include both equity and debt.

Foreign investors can simultaneously sell Indian shares while buying Indian bonds.

Nevertheless, persistent equity outflows can increase demand for foreign currency when investors convert rupee proceeds back into dollars or other currencies.

That creates another source of pressure on the rupee.

At the same time, India continues to benefit from more stable external inflows, including services exports, remittances, foreign direct investment and non-resident deposits.

This is one reason the RBI continues to describe the external sector as resilient despite the recent currency pressure.

The September reserve surge was partly unusual

The size of the current decline looks particularly large because it follows an unusually strong increase in reserves.

India’s reserves had fallen substantially earlier in 2026 as the RBI intervened during periods of rupee weakness.

The subsequent recovery was helped by foreign-currency inflows generated through the RBI’s FCNR(B) deposit swap scheme.

The RBI said these measures had mobilised about $143.6 billion in foreign-currency inflows by September 18.

That inflow temporarily pushed reserves sharply higher.

Consequently, part of the current decline represents a reversal from an unusually high level rather than a simple depletion of India’s underlying external buffer.

This is an important distinction when comparing today’s reserve position with earlier periods.

How much protection does India still have?

Despite the recent decline, India’s reserve position remains substantial.

At $734.6 billion, the country’s foreign-exchange reserves provide approximately 11 months of import cover, according to Governor Malhotra’s October policy statement.

The reserves also cover approximately 94.4% of India’s external debt.

Those figures provide an important counterweight to concerns about the headline decline.

India is not approaching a traditional balance-of-payments crisis simply because reserves have fallen for four weeks.

The more immediate issue is how quickly the reserves decline if the external shock persists.

A prolonged period of high oil prices, weak capital flows and a stronger US dollar would require the RBI to decide how much volatility to tolerate and how much foreign exchange to deploy.

RBI has another reason to use FX swaps

The RBI’s intervention strategy is not limited to outright dollar sales.

It has also used sell/buy dollar-rupee swaps.

These transactions allow the central bank to influence liquidity conditions in the domestic banking system while managing its foreign-exchange position.

This matters because India’s banking system has experienced substantial surplus liquidity.

Selling dollars directly can absorb rupees from the financial system. FX swaps can provide another mechanism for managing that liquidity while responding to foreign-exchange conditions.

The RBI therefore has multiple tools available instead of relying exclusively on spot-market intervention.

The reserve decline comes as RBI raises interest rates

The currency story has also become connected to monetary policy.

On October 7, the RBI raised the repo rate by 25 basis points to 5.50%, the first rate increase in nearly four years.

The Monetary Policy Committee also changed its stance from neutral to “calibrated tightening.”

The move reflects rising inflation risks linked to higher crude prices, food-price pressures and broader global conditions.

Ordinarily, higher domestic interest rates can provide some support to a currency by improving the relative return on domestic assets.

But the relationship is not automatic.

If global oil prices are rising sharply and US yields are also increasing, a single 25-basis-point Indian rate hike may not be enough to reverse currency pressures.

That appears to be what the market is currently signalling.

The rupee remained close to its record low even after the RBI’s rate decision.

India is not defending ₹96 or ₹97 specifically

One of the most important points for understanding the RBI’s strategy is that the central bank does not appear to be defending a particular numerical exchange-rate level.

Governor Malhotra has indicated that markets can behave irrationally in the short term and suggested that the rupee could be undervalued based on several indicators.

That gives the RBI room to allow the currency to move while intervening when volatility becomes excessive.

A policy of defending a specific level would require potentially much larger reserve usage if the market persistently moved in the opposite direction.

Managing volatility is less expensive and gives the central bank greater flexibility.

What the reserve decline means for businesses

The immediate impact of a weaker rupee is uneven.

Import-heavy companies face higher costs when the dollar rises against the rupee.

Oil marketing companies, airlines, electronics importers, machinery buyers and businesses with significant foreign-currency liabilities can therefore face greater pressure.

Exporters can benefit because their foreign-currency revenues translate into more rupees.

Information technology and business-services companies with large dollar revenues can also receive a translation benefit, although their overall profitability depends on hedging, wage costs and other factors.

For consumers, the impact can eventually appear through imported fuel, electronics, components and other goods.

If higher oil prices and a weaker rupee occur simultaneously, imported inflation becomes a particularly important concern.

The bigger picture

India’s reserve position remains one of the country’s strongest external buffers, but the recent decline shows how quickly that buffer can move when several global pressures arrive simultaneously.

The roughly $51 billion decline from the September peak is significant, but it should not be interpreted as an equivalent amount of money spent defending the rupee. Reserve valuation changes, gold prices, foreign-currency movements and RBI intervention all influence the headline figure.

The more important signal is the combination of trends: the rupee is close to its record low, crude remains expensive, US yields are elevated and foreign investors remain selective. Those forces make it harder for the RBI to stabilise the currency without accepting some depreciation or using more reserves.

FAQs

How much are India’s forex reserves now?

India’s foreign-exchange reserves stood at $734.6 billion as of October 2, 2026, according to the RBI Governor’s policy statement.

How much have India’s reserves fallen from their peak?

Reserves have declined by roughly $51 billion from the record $785.71 billion reached on September 4.

Is the entire $51 billion decline because RBI sold dollars?

No. Reserve changes also reflect valuation movements in foreign-currency assets and gold. RBI dollar sales are one important factor, but the entire decline cannot be attributed to intervention.

Why is the rupee weakening despite RBI intervention?

The rupee is facing several external pressures simultaneously, including high crude prices, elevated US Treasury yields, a stronger dollar and foreign portfolio outflows. RBI intervention can reduce excessive volatility without necessarily reversing the broader direction of the currency.

Looking Ahead

The next few weeks will be important for determining whether India’s reserve decline stabilises or continues. The RBI has substantial foreign-exchange buffers and multiple liquidity and intervention tools, but persistent oil-price pressure and global yields could force a difficult trade-off between allowing greater rupee flexibility and using more reserves to smooth the adjustment.

For the Indian economy, the bigger question is not whether reserves fall temporarily, but whether the external shock becomes persistent enough to materially widen the current-account deficit and weaken capital inflows. Strong services exports, remittances, FDI and India’s still-large reserve stock provide important protection, but the combination of expensive energy, a strong dollar and volatile global capital flows will remain a key risk for the rupee and imported inflation.