India Cuts US Bond Holdings as Gold Share Rises in Forex Reserves

India has lowered its holdings of US government bonds as it adjusts the composition of its foreign exchange reserves.  

As per Bloomberg,the Reserve Bank of India’s (RBI) long-term US Treasury holdings fell to $174 billion, a 26% drop from the 2023 peak, according to US Treasury data released last week. The level is the lowest in 5 years. 

US Treasuries now make up around one-third of India’s forex reserves, compared with about 40% a year earlier, based on RBI data. The share of gold and other assets has increased over the same period. 

Rupee Support and Reserve Allocation 

The reduction in Treasury holdings comes amid pressure on the rupee. The currency has weakened to record lows following delays in an India–US trade agreement and 50% tariffs on Indian exports, the highest in Asia. Selling US bonds allows the RBI to deploy dollars in the market to support the rupee. 

Finance Minister Nirmala Sitharaman said in September that the central bank was taking a “very considered decision” to diversify reserve assets. 

Broader Central Bank Moves 

India’s shift aligns with moves by other countries. China and Brazil cut their long-term US Treasury holdings in October to the lowest levels since at least 2011. Several central banks have increased gold purchases, including Poland, which recently approved plans to buy 150 tonnes of gold. 

Concerns over sanctions, trade disputes and geopolitical tensions have influenced reserve management decisions globally, particularly after Russia’s foreign assets were frozen in 2022. 

India’s Position Among Treasury Holders 

India is a smaller holder of US government debt compared with major economies. Its Treasury portfolio is about one-quarter of China’s roughly $683 billion holdings and far below Japan’s $1.2 trillion. Foreign ownership of US Treasuries remains near record highs. 

Read More: State Bond Supply Eases as Indian Bond Prices Dip in Line with US Yield Spike! 

Conclusion 

The fall in India’s US bond holdings and the rise in gold reserves reflect changes in reserve allocation amid currency pressures and global policy shifts. The US dollar and Treasuries remain key reserve assets, while diversification trends among central banks continue. 

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