Kolkata: The composition of India’s foreign exchange reserves is changing. While US dollar and foreign currencies still dominate, gold is gradually coming to play an increasingly significant role and there is a conscious effort to push up gold holdings steadily. In recent years, the RBI continuously increased its gold purchases, strengthening the reserve balance. By January 2026, the share of gold in India’s total forex reserves had reached more than 16%, the highest in the last two decades.
This change is not only a result of rising prices but also an outcome of an increase in the actual quantity of gold. Amidst global uncertainties, efforts to reduce dependence on the dollar, and pressure on the rupee, the RBI has strategically given importance to gold. Experts think that this step will further strengthen India’s financial security and provide a stable support during times of crisis. In fact, RBI si not the only central bank trying to lessen its dependence on the US Dollar. The Chinese central bank has been buyig gold even more aggressively in recent years abd the rising demand from several central banks is significantly responsible for pushing up gold prices in the global markets.
Rise in forex reserves
According to RBI data, in the week ending January 9, India’s total foreign exchange reserves rose $392 million to reach $687.2 billion. In the previous week, the reserves went down $9.8 billion. This rise was mainly due to the rise in gold prices. Foreign currency assets in the forex basket decreased by $1.1 billion to $550.8 billion. This decline was mainly due to fluctuations in the Euro, Pound, and Yen. Meanwhile, the value of gold increased by $1.6 billion to $112.8 billion. SDRs underwent a slight decrease of $39 million, and the IMF reserve position decreased by $13 million to $4.8 billion.
Highest gold share in 20 years
Gold’s share in India’s total foreign exchange reserves increased to 16.2% in January 2026 — the highest in two decades. It was only 2.8% in 2007. This increase is largely due not only to price appreciation but also to purchase of the yellow metal by the central bank. The RBI’s gold holdings, which were around 357 tonnes in the early 2000s, has now shot up to about 880 tonnes by the end of 2025. RBI stepped up gold purchase especially in the fiscal year 2025.
Impact of rising gold prices
Last week, the price of gold in the global market jumped by about 2.5%. Over the past month, this increase has been approximately 5.5%. This is why the value of gold in India’s reserves increased rapidly, supporting the overall reserves. It is well known that the RBI is trying to reduce dependence on the US dollar and increasing its holdings of gold as a secured asset. Gold is not dependent on any country or institution and is regarded as a ‘counterparty-free hedge’. Although foreign currency still constitutes the largest part of the reserves, the role of gold is continuously increasing.
India’s share in US bonds dips
The RBI is selling US Treasury bonds in recent months in a bid to reduce its dollar reserves. India now reportedly holds less than $200 billion in US bonds. Bankers have pointed out that RBI intervened in the market by selling dollars to manage the rupee, especially after the additional tariffs imposed on India.
Significantly, India comes fourth in the list of nations in terms of foreign exchange reserves. The countries ahead of India are China, Japan and Switzerland. But in terms of US Treasury Bond holdings India is at number six behind Japan, Britain, China, Belgium and Canada. The rising gold reserves of the RBI is a sign of economic security, which economists point out will help in financial stability.