RBI Forex Reserves Shift: Gold Rises, US Treasury Bill Holdings Fall – What It Means

As of the week ending August 22, 2025, India’s foreign exchange reserves stood at approximately ₹60.79 lakh crore. This includes foreign currency assets, gold, special drawing rights, and reserve tranche positions. 

Though a bit lower than the record-high of nearly ₹62.03 lakh crore in late September 2024, the reserve buffer remains steady.

Now, the RBI is actively restructuring its foreign reserve composition. Rather than leaning heavily on US Treasury bills, the central bank is favouring gold. This shift signals a deliberate turn toward greater diversification and financial stability.

What’s the Difference Between Gold and US Treasury Bills?

The role of gold reserves and US Treasury Bills is totally different as a foreign reserve. To understand this better, imagine packing for a long journey: gold is your rock-solid, durable gear, an unchanging and universally valuable vehicle, while US Treasuries are like petrol.

While the vehicle will remain the same, you can decide between CNG and petrol. So, investing in a vehicle seems more long-term; however, hoarding petrol or CNG doesn’t seem like a sane choice.

gold is a universally recognised store of value, physical, tangible, and with no issuer risk. While T-bills are debt obligations of the US government, and rely on its fiscal stability and creditworthiness. 

In times of systemic stress, gold shines as a reliable asset; however, US Treasuries could be subject to market swings or political backlash if the US economy stumbles. This is particularly relevant amid rising talk of de-dollarisation, where central banks, including India, diversify away from US dollar-dominated reserve frameworks.

Why Is RBI Reducing Dependence on US Treasury Bills?

Historically, the RBI held a substantial chunk of its reserves in US Treasuries. As of June 2025, holdings had dropped from $242 billion a year ago to $227 billion, though India remains among the top 20 global investors in American debt.

Yet, considering ongoing trade tensions, geopolitical friction, and economic uncertainties surrounding the US, the RBI seems intent on relocating some of that exposure into safe-haven gold.

Here’s a table outlining key geopolitically relevant tensions between India and the USA over the past 1–2 years:
 

These developments underscore why decreased reliance on US-denominated assets makes sense for a country prioritising strategic autonomy.

To highlight how other nations are adjusting their reserve strategies: China, the world’s third-largest holder of US Treasuries, trimmed its holdings to $756 billion in June 2025, down from $780 billion a year earlier. Meanwhile, Israel increased its exposure during this period, highlighting divergent central bank strategies driven by geopolitical and domestic priorities.

India’s Reserves Tilt Toward Gold

Alongside the reduction in Treasury exposure, RBI added a notable 39.22 metric tonnes of gold, bringing total holdings to 879.98 tonnes as of June 27, 2025, up from 840.76 tonnes a year earlier.

Here’s a snapshot of key data:
 

Table Overview: The decrease in US Treasury holdings and simultaneous increase in gold reflect RBI’s strategic rebalancing toward safer reserve assets. The overall reserve pool remains sufficiently strong for economic stability.

Beyond these figures, another important perspective: globally, this is part of an unprecedented reorientation, for the first time since the 1990s, central banks now hold more gold than US Treasuries, signalling a profound shift in reserve strategies.

This move also reflects concerns around liquidity, long-term value preservation, and sovereignty in the face of rising geopolitical fragmentation and monetary uncertainty.

Experts’ Take on India’s Strategy

Leading economists underscore the rationale behind India’s evolving reserve composition:

• Madan Sabnavis, Chief Economist, Bank of Baroda, told Economic Times: “India’s rising gold reserves reflect a global trend of de-dollarisation. Central banks are diversifying their assets to guard against overdependence on the US dollar.”
   
• Gaura Sengupta, Economist, IDFC First Bank, added that despite lower yields, India cut US Treasury holdings by $14.5 billion in one year, reflecting a deliberate shift away from US debt. She noted risks in US fiscal metrics and high yields have made Treasuries comparatively less attractive.

Their insights underscore that this is not just a defensive move; it’s a strategic response to shifting global realities.

Conclusion

In essence, the RBI’s adjustment of its foreign exchange reserves, favouring gold over US Treasuries, is a thoughtful, strategic repositioning that reflects broader global trends. While India’s total reserves remain strong at around $690 billion in August 2025, the composition is shifting toward gold, with holdings nearing 880 tonnes, and away from Treasury bills, now at $227 billion.

This approach enhances resilience against geopolitical shocks, ensures greater asset sovereignty, and aligns India with central banks worldwide, prioritising stability and flexibility in an uncertain economic era.

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