RBI's forex buffer gets a boost, closer to $700 billion: What's behind the jump?

India's foreign exchange reserves have climbed to their highest level in nearly three months, giving the Reserve Bank of India (RBI) a stronger cushion against global uncertainties. The country's forex reserves rose sharply by $10.5 billion in just one week, marking the biggest weekly increase in six months, reported Reuters.According to RBI data, India's foreign exchange reserves stood at $692.9 billion as of July 31, 2026.BIGGEST WEEKLY RISE SINCE JANUARYThe latest increase is the strongest weekly gain since the week ended January 30. The sharp rise has taken India's forex reserves close to the $700 billion mark.A larger forex reserve gives the RBI greater flexibility to manage volatility in the rupee, particularly at a time when global crude oil prices and geopolitical tensions continue to create uncertainty. WHAT DROVE THE INCREASE?According to market participants, the jump in reserves was largely supported by strong inflows under the RBI's Foreign Currency Non-Resident (FCNR) deposit scheme.The central bank launched the special foreign currency deposit drive in June to strengthen India's balance of payments. As of July 31, banks had mobilised $36.7 billion through FCNR deposits. Banks are also allowed to swap these foreign currency deposits with the RBI under a zero-cost hedging facility, which will remain available until the end of September.Market experts believe these inflows could push India's forex reserves above the $700 billion mark in the coming weeks.RBI SAYS RESERVES REMAIN COMFORTABLESpeaking during the latest monetary policy announcement, RBI Governor Sanjay Malhotra said India's foreign exchange reserves remain adequate on all key measures."India's foreign exchange reserves continue to be adequate in terms of the standard metrics of reserve adequacy with import cover of over 10 months and external debt cover of 90.8%," the Governor said.Import cover refers to the number of months of imports that can be financed using the country's foreign exchange reserves. A higher import cover is generally seen as a sign of stronger external stability.WHY DO FOREX RESERVES MATTER?Foreign exchange reserves play an important role in protecting the economy during periods of global uncertainty. They help the RBI manage sharp movements in the rupee, meet external payment obligations and maintain confidence in India's financial stability.With reserves now standing at $692.9 billion, India has strengthened its financial buffer at a time when global markets continue to face uncertainty due to volatile crude oil prices and geopolitical developments.- EndsPublished By: Jasmine anandPublished On: Aug 5, 2026 13:01 IST