Global Storms, Local Calm—Rupee Finds Refuge in RBI’s Reserve Fortress

Image Source: CNBC TV18

India’s foreign exchange reserves have surged to $702.78 billion as of June 27, 2025, marking a sharp rebound of $4.84 billion in just one week. As the rupee faces pressure from global uncertainties, these reserves act as a powerful buffer—helping the Reserve Bank of India (RBI) stabilize the currency, manage inflation, and maintain investor confidence.

1. What Are Forex Reserves and Why Do They Matter?

Forex reserves are assets held by the RBI in foreign currencies, gold, Special Drawing Rights (SDRs), and the IMF reserve position.
They are used to intervene in currency markets, pay for imports, and service external debt.
A strong reserve position helps defend the rupee during periods of volatility, such as oil price spikes, geopolitical tensions, or capital outflows.

2. The Latest Numbers

As of June 27, 2025:

Total reserves: $702.78 billion
Foreign currency assets: $594.82 billion (↑ $5.75 billion)
Gold reserves: $84.5 billion (↓ $1.23 billion)
SDRs: $18.83 billion
IMF reserve position: $4.62 billion

3. How the RBI Uses Reserves to Shield the Rupee

The RBI sells dollars from its reserves when the rupee weakens sharply, absorbing excess demand and stabilizing the exchange rate.
It buys dollars when the rupee strengthens, building reserves and preventing excessive appreciation.
This active intervention helps smooth volatility and maintain macroeconomic stability.

4. Why This Matters Now

The rupee has faced pressure due to global trade tensions, rising U.S. bond yields, and oil price fluctuations.
With reserves covering 11 months of imports and 96% of external debt, India is well-positioned to weather external shocks.
A healthy reserve buffer also boosts credit ratings, foreign investor confidence, and monetary policy flexibility.

Sources: The Hindu BusinessLine, News18, Economic Times, CNBC TV18