Gold’s Rising Share in India’s Forex Reserve

• 22 Apr 2025

Source: BL

As per the World Gold Council (WGC), India's gold share in foreign exchange reserves has nearly doubled from 6.7% in 2019 to 12% by February 2025. 

• India’s forex reserves rose to USD 677.84 billion in April 2025, led by an increase of USD 892 million in FCA and a USD 638 million rise in gold reserves, while SDRs fell by USD 6 million. 

Foreign Exchange Reserves (Forex Reserves): 

• About: Forex are reserve assets held by a central bank in foreign currencies. It may include foreign currencies, bonds, treasury bills and other government securities, typically denominated in US dollars. 
  • They are an important component of the Balance of Payment (BoP) 
  • The RBI  is the custodian of India's foreign exchange reserves, deriving its authority from the provisions of the RBI Act, 1934. 
• Purpose: It helps meet external payment needs and stabilize the national currency. 
  • They also serve as a buffer during global financial shocks and ensure confidence in monetary policies. 
• Components of India’s Forex Reserves: 
  • Foreign Currency Assets (FCA) (largest contributor) 
  • Gold reserves (second largest contributor) 
  • Special Drawing Rights 
    • It is not a currency but its value is determined by a basket of 5 major currencies: the US dollar, euro, Chinese renminbi, Japanese yen, and British pound sterling. 
  • Reserve Tranche Position (RTP) with the IMF 
    • RTP is a country's quota-based access to IMF resources, available for borrowing without strict conditions, used for BoPs or financial stability. 

Read More: Rise in Forex Reserves