India's forex reserves hit all-time high of $729.33bn after $12.42bn jump

New Delhi, August 28, 2026: India's foreign exchange reserves reached a record high of $729.3 billion in the week ending August 21, bolstering the Reserve Bank of India (RBI) with enhanced capabilities to handle pressure on the rupee amidst increasing oil prices and global economic uncertainties. According to the Reserve Bank of India's announcement on Friday, the country's forex reserves rose by $12.4 billion during the week, setting a new record that surpassed the previous high of $728.5 billion set in February.

The upward trend in foreign currency reserves has been bolstered by significant inflows, driven by initiatives launched by the central bank in June to attract overseas capital. These measures include a special deposit program targeting overseas Indians and other non-resident customers. Through August 21, these efforts have garnered approximately $72.8 billion in inflows, bolstering India's external standing and diminishing the risk of a third consecutive year of a deficit in the country's broadest measure of capital flows.

This surge in reserves also grants the RBI increased flexibility to act in the foreign exchange market, should the need arise. The Indian currency has recovered about 1.7 percent from its record low hit in May, yet it remains vulnerable to pressures, particularly due to higher crude oil prices and India's heavy reliance on imported fuel.

However, attracting overseas deposits poses a substantial challenge for the central bank. The special diaspora deposit program entails the RBI covering the hedging expenses incurred by banks, enabling lenders to provide more appealing interest rates to overseas clients. The expenses associated with raising these funds have notably escalated, as U.S. interest rates are substantially higher than those observed in 2013, the year the RBI last relied on overseas residents to bolster foreign exchange reserves.

Analysts have highlighted that the RBI typically allocates the acquired dollars to assets generating relatively low returns, which can be significantly lower than the cost incurred for raising funds, resulting in a "carry cost" for the nation. Additionally, the annual expense could amount to around $5.7 billion, as per estimates presented in the analysis.

In a recent move, the RBI expedited the conclusion of the special diaspora deposit program, with Governor Sanjay Malhotra noting that inflows had been more robust than expected.