India’s forex reserves sufficient, not a matter of concern, RBI governor says

MUMBAI: India’s foreign exchange reserves are sufficient and not a matter of concern, Reserve Bank of India Governor Sanjay Malhotra said on Wednesday, amid concerns that large capital market outflows could erode the central bank’s dollar holdings.

Forex reserves rose to $697.1 billion as of April 3, per the latest data, from $688.06 billion in the previous week.

The reserves have declined from a record high of $728.49 billion in late February, primarily due to central bank forex intervention to shield the rupee from pressures stemming from the Middle East war. Lower gold prices have also eroded the value of reserves.

The reserves are sufficient for at least 11 months, which is a “standard metric”, Malhotra said.

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Trade agreements to help current, capital accounts

India’s trade agreements with major economies including the UK should help improve its current and capital accounts and reduce its balance of payments deficit, Malhotra said.

The current account deficit for the Asian economy widened to $13.2 billion, or 1.3% of GDP, in the October-to-December quarter on the back of a higher goods trade deficit, compared with $11.3 billion, or 1.1% of GDP, a year earlier.

India’s balance of payments recorded a deficit of $24.4 billion in that quarter, compared with a deficit of $37.7 billion a year earlier.

“The capital accounts are robust and current account is quite manageable so not concerned about the BoP position,” Malhotra said. “A lot of (trade) agreements with major economies that have come in place…All of this should help.”

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India should see foreign portfolio investment flows improve this year, helped by investments in technology and financial services sector, the governor said, after a record selloff by foreign portfolio investors in the financial year 2025-26.

Macroeconomic fundamentals of the country are strong, Malhotra said.

“…those who want to make long-term money will certainly come to India, and those who are in for a quick buck, will come and go.”