Indian central bank's FX trading gains surge 52% to $17.7 billion in FY26, boosting income

MUMBAI: The Indian central bank’s gains from foreign exchange transactions rose 52% to 1.69 trillion rupees ($17.70 billion) in the fiscal year ending March, according to its annual report released on Friday.

The Reserve Bank of India books gains when it sells dollars from its reserves in the foreign exchange markets to protect the rupee, using the historical average price of its dollar purchases as a benchmark.

In the previous year, the RBI reported a 1.11 trillion rupee gain from forex intervention. Earlier this month, the central bank said it will transfer a record 2.87 trillion rupees to the federal government for the fiscal year ending March 2026, after setting aside funds for its contingency reserves.

The RBI’s balance sheet expanded by 20.61% to 91.97 trillion rupees as of March 31, 2026.

Alongside gains from foreign exchange operations, the RBI also earned from its investments in foreign securities, including U.S. treasuries.

Interest income from foreign securities rose to 1.077 trillion from 970.07 billion rupees a year earlier.

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Macro outlook

The annual report, which comes a week before a crucial monetary policy review amid the Middle East crisis, said India’s economy is expected to remain resilient this year despite a challenging external environment.

But a “prolonged” crisis in the Middle East could pose a “downside risk”, the report said.

The RBI has forecast growth at 6.9% for the current financial year, while inflation is seen averaging 4.6%, but economists expect the projections to be revised.

Analysts are also split on whether the central bank will hike rates preemptively, as rising fuel costs and a weak monsoon could push up price pressures in the economy.

“In a highly uncertain global environment, continuous assessment of the evolving developments is warranted to frame the appropriate policy response on an ongoing basis,” the annual report said, without giving clues on the direction of interest rates from here.

It added that banking system liquidity operations would continue to be in sync with the monetary policy stance.

“Foreign exchange operations would be principle-based, guided by the objective of ensuring orderly movements in the exchange rate of the Indian rupee,” the report said.

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Both the rupee and interest rates have come under pressure since March due to surging global oil prices.

Indian rupee internationalisation

The annual report, which also lays down the central bank’s agenda for the year ahead, said the RBI will continue to push forward efforts to internalise the rupee.

There has been a considerable pick-up in INR-based invoicing and settlement since July 2022, the RBI said.

Between August 2022 and July 2025, compound annual growth of imports and exports invoiced in INR has been 20.9% and 12.7%, respectively, data from the report showed.

In 2025-26, trade invoicing and settlement in INR rose 6.5% for exports and 9.5% for imports.

“The INR internationalisation process has been mutually beneficial to all trading partners, and based on the principles of reciprocity, it has given a fillip to trade invoicing in several other emerging market currencies,” the RBI said.