According to figures issued by the Reserve Bank of India (RBI), India’s foreign exchange reserves increased by $12.6 billion during the week ended 27 September, crossing the $700 billion mark for the first time. With this achievement, India’s economy joins China, Japan, and Switzerland as the only four in the world to have foreign reserves of over $700 billion.

The $12.6 billion increase is also the largest weekly addition since 14 July 2023. In the previous reporting week, India’s foreign exchange reserves grew by $2.8 billion, reaching $692.3 billion. With stable oil prices and increased inflows into Indian stocks and bonds, the reserves have now risen to $705 billion.

According to analysts at BofA Securities, India’s reserves might amount to $745 billion by March 2026 since the nation’s balance of payments is expected to maintain a comfortable surplus of $40–50 billion per year. The monetary authority “seems relaxed about holding larger forex reserves, owing to its desire to build buffers against contingent external risks,” BofA Securities wrote in an investor note on Friday.

It took India over three years to add the last $100 billion to its reserves after it had reached that milestone in December 2003. However, on February 29, 2008, reserves exceeded $300 billion, and in less than a year, the third $100 billion (from $200 billion to $300 billion) was reached. According to data from Bloomberg, the value climbed at the fastest rate—roughly ten months—from $200 billion to $300 billion, while the rise from $300 billion to $400 billion took over nine years.

Reserves have built impressively, particularly after the appointment of the current RBI governor. According to BofA Securities, India’s foreign reserves have increased at the fastest rate ever under Governor Shaktikanta Das, growing by $4.2 billion per month over a 70-month period to reach over $298 billion since he took office. This was more than the $3.3 billion previous record held by former governor Y.V. Reddy.

The reserves peaked in September 2021 at $642 billion but dropped to $525 billion the following year, primarily due to revaluation losses. According to the international brokerage, the balance of payments surplus is the main source of strength in this reserve build-up. India’s reserve adequacy appears strong compared to other major emerging markets, although not especially high.

When there is excessive currency volatility in the foreign exchange market, the RBI usually intervenes. At times, the central bank engages in market purchases and currency sales to counteract the increased volatility of the rupee. The rupee does not necessarily strengthen with larger foreign exchange reserves, though; at the closing of Friday’s trading session, it was hovering around a record low of 83.98 against the US dollar.

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