Sharp slide: Foreign exchange reserves fall by more than $10 billion in a week –

The decline was led by foreign currency assets, which fell by $6.6 billion. These assets, which represent the bulk of reserves, reflect valuation changes in non-dollar currencies such as the euro, pound, and yen, and include the impact of the Reserve Bank of India’s intervention to stabilize the rupee. Gold reserves fell by $3.7 billion during the week. The decline in gold, despite its smaller share in total reserves, indicates a correction in global gold prices during this period.

Other components showed limited movement. Special drawing rights increased slightly by $17 million, while the reserve position in the IMF decreased by $17 million. These changes did not offset losses in foreign currency assets and gold.With this week’s decline, foreign exchange reserves have fallen for four consecutive weeks by more than $40 billion. The Reserve Bank of India said that India’s foreign exchange reserves fell by $11.4 billion last week (ending March 20, 2026) to $698.4 billion.

The previous week (ending March 13) saw a decline of $7.1 billion to $709.8 billion. This has led to talk among commentators about special measures that could be taken to attract foreign exchange inflows.The rupee fell more than 4% as of Wednesday before recovering 1.8% on Thursday after the Reserve Bank of India tightened its rules to curb speculative bets. The Central Bank asked banks to unwind their buying positions in dollars. After some lenders shifted these positions to clients, the Reserve Bank of India issued another directive on Tuesday asking banks not to provide hedging services in the non-deliverable forwards market.

Analysts are also concerned about the RBI’s commitments in the forward market. To defend the rupee, the central bank’s net short position is estimated to reach $77 billion in February 2026, and may rise further in March. While this preserves immediate foreign reserves, it creates significant dollar liabilities in the future. Outstanding contracts could deplete reserves and reduce liquidity. Despite the recovery on Thursday, traders expect continued volatility next week after the conflict escalates.