Foreign exchange reserves declined by 51.1 billion dollars over four consecutive weeks, falling from a record 785.71 billion dollars in the week ended
September 4 to 734.61 billion dollars in the week ended October 2, 2026, according to RBI data. This decline is the largest four-week fall in dollar terms since the RBI's weekly reserves data series began in September 1998. Reserves fell by 12.95 billion dollars in the latest reporting week ended October 2, 2026, according to RBI data released on October 9, 2026. The decline reflected a fall in foreign currency assets, the largest component of reserves, and a reduction in the reported value of gold holdings. RBI intervention in the foreign exchange market, including dollar sales to manage pressure on the rupee, may also have contributed to the drawdown, while currency and asset-price movements affect the reported value of reserves. Experts believe decline in foreign exchange reserves reflects RBI's intervention in the currency market, including dollar sales to manage pressure on the rupee, as well as valuation changes in foreign currency assets and gold holdings. Dollar sales reduce the RBI's foreign currency holdings, while changes in exchange rates and gold prices can affect the reported value of reserves. However, what explains this significant cumulative decline in forex reserves and how can this impact the economy going forward as well as the measures that must be kept in mind are all factors that need to be understood. Economist Mitali Nikore told Times Now Digital, "think of foreign exchange reserves as the country's dollar savings. The RBI uses them to pay for imports, repay foreign debt and steady the rupee. Reserves fell 51.1 billion dollars in four weeks to 734.6 billion dollars, the highest fall on record since September 1998, when the RBI's weekly series began. So why did they fall? Firstly, there is oil-the Indian crude basket averaged 116 dollars per barrel in September 2026, against 82 dollars per barrel in July 2026. The RBI uses dollars to pay for this basket, and the rising cost of oil is using up our reserves faster. The second is foreign investors pulling a net 10.3 billion dollars out of Indian shares and bonds since April-mainly driven by the West Asia crisis, and flight of capital to safety. The third is that a temporary source of dollars has slowed. The RBI's special swap windows for NRI deposits and overseas borrowings brought in 143.6 billion dollars up to 18 September, and the NRI deposit window closed on August 31. Reserves reached 785.7 billion dollars on September 4 after rising 44.9 billion dollars in one week, the largest weekly rise on record. That was the week the NRI deposit window closed, so part of the fall is a return from an unusually high base. The impact is limited for now. Import cover is about 11 months, and the RBI is using a special dollar window for oil marketing companies. Going forward, if the war like situation persists, India would not be able to rely only on fresh foreign investment for dollar inflows. It has to cut the dollars it spends. More oil purchases can be settled in rupees or the seller's currency, which the RBI already permits, provided the seller can use the rupees to buy Indian goods and services. Diversifying oil suppliers, investing in renewable energy and growing services exports, where the surplus was 85.8 billion dollars in April to August, would also help."
