Document title: Sources of Variation in India's Foreign Exchange Reserves during April-June 2026
Issuing authority: Reserve Bank of India, Department of Communication
Reference number: Press Release: 2026-2027/1016
Date: 01 September 2026
External sector and currency
The Reserve Bank reports that foreign exchange reserves in nominal terms fell by US$22.5 billion in April‑June 2026, compared with an increase of US$29.8 billion in the same quarter of 2025. The decline reflects a valuation loss of US$14.4 billion, primarily due to lower gold prices and appreciation of the US dollar against major currencies, versus a valuation gain of US$25.3 billion in April‑June 2025.
Capital markets and flows
Portfolio investment, part of the capital account, recorded an outflow of US$9.6 billion in April‑June 2026, contributing to the overall reduction in reserves. Foreign direct investment (FDI) contributed a net inflow of US$5.2 billion, while other foreign investment components added US$1.6 billion, resulting in a total foreign investment inflow of US$6.9 billion for the quarter.
Banking and credit
Banking capital showed a net outflow of US$1.6 billion, while NRI deposits increased by US$3.6 billion. Short‑term credit contributed a marginal outflow of US$0.1 billion, and external assistance added US$0.7 billion. External commercial borrowings (ECBs) provided a net inflow of US$5.5 billion.
Current account
The current account balance registered a deficit of US$3.4 billion in April‑June 2026, worsening from a deficit of US$4.2 billion in the previous quarter.
Overall balance of payments impact
On a balance‑of‑payments basis, excluding valuation effects, foreign exchange reserves decreased by US$8.1 billion in April‑June 2026, contrasting with an accretion of US$4.5 billion in the same period of 2025. The net increase in reserves (including valuation) was –US$22.5 billion, while the previous year recorded a net increase of US$29.8 billion.
The RBI’s data indicate that the combination of a sizable valuation loss, a current‑account deficit, and significant portfolio outflows drove a sharp contraction in foreign exchange reserves in Q1 2026, reversing the positive trend observed in the corresponding quarter of 2025.