Forex reserves hit record $740.8 billion, lift rupee
India's foreign exchange reserves rose by $11.475 billion in the week ended 28 August 2026 to touch a fresh record of $740.8 billion, according to data released by the Reserve Bank of India (RBI).
The new figure surpassed the earlier record of $728.5 billion, set in the week ended 27 February 2026, before reserves had dipped amid external pressures.
The buildup has coincided with a recovery in the rupee, which advanced over 2.5% from its late-May lows to close near a two-month high against the US dollar.
Rising reserves have improved banks' liquidity buffers, but public sector banks continue to lag private banks in deposit mobilisation even as credit demand outpaces deposit growth system-wide, pushing lenders toward alternative funding sources such as certificates of deposit and bonds.
Composition of India's Foreign Exchange Reserves
India's forex reserves, managed by the RBI, consist of four components: Foreign Currency Assets (FCA), gold, Special Drawing Rights (SDRs), and the Reserve Tranche Position (RTP) with the International Monetary Fund (IMF). FCA — mostly foreign government securities and deposits held in currencies like the US dollar, euro, and yen — is by far the largest and most liquid component. Gold reserves have grown as a share of the total in recent years as the RBI has diversified holdings, since gold carries no counterparty default risk, unlike bonds or bank deposits.
The $740.8 billion record reflects growth mainly in the FCA and gold components, providing the RBI greater capacity to intervene in currency markets and stabilise the rupee.
Import Cover and Reserve Adequacy
Import cover measures how many months of a country's imports the reserves could finance if all other capital inflows stopped; the conventional international benchmark for adequacy is three months. It is one of several reserve-adequacy metrics economists and policymakers track (alongside the ratio of reserves to short-term external debt), used to assess a country's external-sector resilience against shocks like sudden capital outflows or import-price spikes.
Key Details
- Reserve adequacy is judged not just by the absolute dollar figure but by import cover and short-term debt coverage.
- Record-high reserves generally strengthen investor confidence and a currency's resilience to volatility.
- The RBI's reserve accumulation in this period was supported by measures including concessional forex swap arrangements introduced amid earlier rupee depreciation.
The record reserve level directly supported the rupee's recovery by giving the RBI a larger buffer to smooth exchange-rate volatility and meet external payment obligations.
Credit-Deposit (CD) Ratio and Bank Liquidity
The Credit-Deposit Ratio measures the proportion of a bank's deposits that have been deployed as loans; a rising or high CD ratio signals that credit growth is outpacing deposit mobilisation, which can pressure banks to raise funds from costlier wholesale sources like certificates of deposit, money markets (including TREPS), and bonds. The RBI monitors this alongside prudential norms such as the Liquidity Coverage Ratio (LCR), a Basel III requirement mandating banks to hold sufficient high-quality liquid assets to survive a 30-day stress scenario.
Key Details
- Credit growth has been running noticeably ahead of deposit growth in 2026, widening the credit-deposit gap.
- Private sector banks have shown more aggressive lending (higher CD ratios) compared with public sector banks.
- Public sector banks, despite comparatively higher reported technical efficiency, have lagged private banks in deposit growth, increasing reliance on borrowings.
- Basel III liquidity norms (CRAR, LCR) are enforced by the RBI on all scheduled commercial banks operating in India.
Even as record forex reserves improve overall system liquidity, the domestic credit-deposit mismatch shows that liquidity gains at the macro level do not automatically resolve bank-level funding pressures, particularly for public sector banks.
- Forex reserves: $740.8 billion (week ended 28 August 2026), up $11.475 billion week-on-week — an all-time high.
- Previous record: $728.5 billion (week ended 27 February 2026).
- Foreign Currency Assets and gold are the two largest components of the reserves; gold reserves rose during the same week.
- Rupee gained over 2.5% from its late-May 2026 lows, touching a near two-month high against the US dollar.
- Reserve adequacy benchmark (import cover): conventionally three months of imports.
- Credit growth has outpaced deposit growth in 2026, with the gap prompting greater bank reliance on certificates of deposit and bond issuances for funding.