India's Forex Reserves Reach Record $729.3 Billion

Aug 28, 2026

66 min

Aug 28, 2026 17:30

India’s forex reserves hit record $729.3 billion on strong dollar inflows

## Record High Forex Reserves

India's foreign exchange reserves have reached an unprecedented $729.3 billion as of August 21, 2026. This milestone was achieved due to strong foreign currency inflows, bolstered by measures from the Reserve Bank of India (RBI) to attract overseas capital.

## RBI's Strategic Measures

In June, the RBI introduced initiatives to draw in foreign investments, including a special deposit program targeting overseas Indians and non-residents. These efforts have resulted in inflows of approximately $72.8 billion by August 21.

## Impact on the Rupee

The increase in reserves provides the RBI with enhanced capability to support the rupee, which has recovered 1.7% from its low in May. However, the currency remains under pressure due to high oil prices and reliance on imported fuel.

## Costs and Challenges

While the strategy has strengthened India's external position, it comes with significant costs. The RBI covers hedging costs for banks, allowing them to offer competitive interest rates to overseas customers. This approach has a "carry cost," estimated at $5.7 billion annually, as the returns on invested dollars are lower than the costs of raising them.

## Future Outlook

The RBI recently decided to close the special deposit program earlier than planned, citing stronger-than-expected inflows. This decision reflects the central bank's ongoing efforts to manage the country's foreign exchange reserves effectively.

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