India Quietly Rebalances Its Forex Portfolio Amid Global Uncertainty
In a quiet but highly significant move, the Reserve Bank of India has sharply reduced its holdings of US Treasury securities by 21%, signalling a rethink in how India deploys its global wealth. RBI’s holdings fell from $241.4 billion in October 2024 to $190.7 billion a year later, pushing exposure below the $200 billion mark for the first time in several years. The central bank appears to be playing the long game, focusing on risk diversification, global trend assessment, and a reshaping of its reserve portfolio for a more uncertain world, even as US bonds continued to offer relatively attractive yields.
Stability Over Short-Term Gains: RBI Plays the Long Game
Even though US 10-year Treasury yields have hovered in the attractive 4%–4.8% range for quite some time, the RBI was not driven by the pursuit of higher returns. This was not a yield play but a strategic move. With India’s foreign exchange reserves positioned just below the $700-billion mark, the central bank chose caution over temptation, reshaping its asset composition to reduce concentration risk.
Experts say the message is clear: security, flexibility, and long-term resilience matter more than short-term profits. At a time when the world is grappling with geopolitical tensions and financial uncertainty, the RBI appears to be future-proofing India’s reserves, quietly, deliberately, and with stability as the priority rather than flashy yields.
Gold Takes Centre Stage In RBI’s Reserve Strategy
The RBI has been quietly reducing its investments in US Treasury securities, and as a result, gold has received the attention it deserves. India’s gold reserves reached 880.8 tonnes by September 2025, while gold’s share in the country’s forex reserves jumped from 9% to 13.9% in just one year.
Surprisingly, this shift was not driven by aggressive gold buying. In 2025, the RBI purchased only 4 tonnes of gold but made a bold move by repatriating more than 64 tonnes from overseas vaults. The approach reflects an age-old principle of prioritising safety, relying less on foreign-held assets and more on value that never loses its appeal.
Amid a turbulent and unpredictable global environment, gold is not just shining; it is quietly anchoring India’s financial resilience.
What The RBI’s Reserve Rebalancing Signals
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US Treasury holdings cut by over $50 billion: The RBI’s sharp reduction reflects a deliberate move away from dollar-heavy assets, lowering exposure to geopolitical, fiscal, and currency-related risks linked to the US economy.
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Gold reserves rise to around 880 metric tonnes: By increasing gold holdings, the RBI is reinforcing long-term value, inflation protection, and a hedge against currency volatility during periods of global financial uncertainty.
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Shift towards diversification and resilience: India is spreading its reserves across assets and geographies, reducing reliance on any single currency or market while building a more balanced, shock-resistant portfolio.
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Forex reserves remain strong and stable: Despite the reshuffle, India’s reserves are sufficient to cover imports, service external debt, and manage sudden capital outflows in turbulent times.
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A forward-looking shield against global shocks: The strategy underscores proactive risk management, preparing India’s reserves to withstand market volatility, geopolitical tensions, interest-rate swings, and global financial disruptions.
Global Diversification Trend, Domestic Stability Intact
India’s decision to cut back on its investments in US Treasuries signals a global reserve management trend that is becoming increasingly prevalent. At the same time, China also reduced its US bond holdings by 9.3% to $688.7 billion, showing that central banks of major economies are reassessing their dollar-heavy portfolios amid rising geopolitical tensions and economic uncertainties.
These parallel actions indicate a shift toward diversification rather than reliance on a single market or currency. Moreover, India’s strategy has not weakened its external strength. The country’s foreign exchange reserves remain unaffected by the asset reshuffling and continue to hover around $685 billion. This steady position reinforces the RBI’s core commitments, liquidity provision, capital protection, and risk management, while quietly equipping India to navigate an increasingly volatile and unpredictable global financial environment.