India’s forex reserves declined sharply for the second consecutive week, falling by $7.511 billion to $681.384 billion for the week ended May 22, according to the latest data released by the Reserve Bank of India (RBI). The decline has pushed the country’s forex reserves to their lowest level in more than a year as the central bank continues to intervene in currency markets to support the rupee amid global geopolitical tensions and rising crude oil prices.
Key Highlights
- India’s forex reserves dropped $7.51 billion as RBI intensified interventions to stabilize rupee volatility.
- Gold holdings and foreign currency assets declined sharply, pushing reserves to yearly lows.
The latest drop follows a decline of $8.094 billion recorded in the previous week, taking the cumulative fall in reserves to over $15.6 billion in just two weeks. India’s forex reserves had previously touched a record high of $728.494 billion in February 2026 before coming under pressure from external market volatility and sustained RBI intervention.
Gold and Foreign Currency Assets Drive Decline
A significant portion of the latest decline came from a sharp fall in gold reserves. RBI data showed that gold holdings dropped by $4.53 billion during the reporting week to $114.786 billion. At the same time, foreign currency assets (FCAs), which form the largest component of India’s forex reserves, fell by $2.872 billion to $543.032 billion.
Foreign currency assets reflect not only dollar holdings but also the valuation impact of currencies such as the euro, pound sterling, and Japanese yen held by the RBI. Fluctuations in global currency markets can therefore influence the overall reserve position.
The RBI also reported that Special Drawing Rights (SDRs) declined by $77 million to $18.748 billion, while India’s reserve position with the International Monetary Fund (IMF) fell by $33 million to $4.818 billion during the week.
Rupee Pressure Amid Middle East Tensions
The decline in reserves comes against the backdrop of heightened geopolitical uncertainty following the escalation of the US-Iran conflict, which has driven up global crude oil prices and increased pressure on emerging market currencies. India, being one of the world’s largest crude oil importers, remains particularly vulnerable to rising energy costs.
According to market data, the Indian rupee weakened to a record low of 96.96 against the US dollar during the week before recovering after aggressive RBI intervention through dollar sales. The rupee later strengthened to around 95 per dollar, supported by the central bank’s efforts to curb excessive volatility.
Also Read: RBI Announces $5 Bn Forex Swap to Ease Rupee and Liquidity Pressure
The RBI has been actively selling dollars from its reserves and conducting liquidity operations to maintain orderly market conditions. The central bank recently reported substantial gains from forex transactions as it stepped up interventions in response to currency market pressures.
The government and the RBI have reiterated their focus on maintaining external sector stability, with policymakers closely tracking developments in global energy markets, capital flows, and exchange rate movements as uncertainty in international markets persists.
