Amid rising global economic and geopolitical uncertainty, India’s central bank appears to be recalibrating its foreign exchange reserve strategy, with a clear move toward diversification and reduced exposure to dollar-denominated assets.
Data from the US Department of Treasury shows that the Reserve Bank of India reduced its holdings of US Treasury securities by 21% over the past year. RBI’s investments in US bonds fell from $241.4 billion on October 31, 2024, to $190.7 billion on October 31, 2025. The US follows an October–September fiscal year.
This marks the first annual decline in RBI’s US treasury exposure in the last 4 years, according to an analysis by a global financial information provider. The reduction comes despite relatively attractive returns, with yields on benchmark 10-year US bonds trading in the 4%–4.8% range during the period.
Experts note that the decision is not linked to yield performance. Instead, it reflects a broader reassessment of reserve allocation as India’s foreign exchange reserves hovered near $700 billion in October.
As part of its diversification push, RBI has been strengthening its gold reserves. After purchasing a record 64 tonnes of gold in 2024, the pace of fresh buying slowed in 2025. As of September-end, India’s total gold reserves stood at 880.8 tonnes.
Gold’s share in the overall foreign exchange reserves rose sharply to 13.9% by September, compared with 9% in the same period a year earlier. While RBI made modest direct gold purchases of 4 tonnes till September 2025, it significantly increased domestically held reserves by repatriating over 64 tonnes of gold from overseas vaults.
The trend of reducing exposure to US treasuries is not limited to India. China also lowered its US treasury holdings by 9.3% during the year, bringing them down to $688.7 billion.
The developments underline a broader global shift among central banks toward reserve diversification, as policymakers navigate an increasingly uncertain economic and geopolitical environment.
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