RBI Reduces US Treasury Holdings Amid Tariff Concerns
India is witnessing a strategic shift in its foreign exchange reserve management, particularly concerning its investments in US Treasury securities. As the Reserve Bank of India (RBI) reduces its holdings, this move is largely influenced by geopolitical tensions, notably the tariffs imposed by President Trump on Indian imports.
Data from the US Department of Treasury indicates that India’s investments in US securities peaked at $247.2 billion in September 2024. However, these holdings have gradually decreased to approximately $219.1 billion by December 2024. This decline reflects a cautious approach by the RBI as it reassesses the risks associated with its foreign investments.
The introduction of steep tariffs has raised concerns about the stability of Indian investments in US securities. Analysts point out that the US has the capability to restrict access to Treasury securities in response to geopolitical events. The example of Russia’s assets being frozen post-invasion of Ukraine highlights the potential vulnerabilities that other nations, including India, could face.
In addition to reducing its US Treasury holdings, the RBI has also adjusted its gold reserves. As of March 2025, gold held abroad fell to 348.62 tonnes, while domestic holdings rose sharply to 511.99 tonnes. This dual strategy of diversifying assets while maintaining liquidity showcases the RBI's commitment to financial stability amid global uncertainties.
While the US remains a significant destination for India's reserve investments, the RBI is also diversifying into high-rated government securities from countries like Japan, Germany, France, and the UK. This strategy aims to reduce reliance on any single asset class, ensuring a balanced and secure reserve portfolio.
The RBI's foreign exchange reserve management continues to prioritize safety, liquidity, and returns. With total forex reserves reaching $694.23 billion by late August 2025, the RBI's measured reduction in US T-bills and increase in gold holdings reflect a prudent approach in navigating the complexities of the global financial landscape.
In conclusion, the RBI's adjustments in its investment strategies reveal a cautious yet adaptive approach to ensure India's financial stability. By spreading its investments across various assets, including sovereign debt, supranational bonds, and gold, the RBI aims to safeguard the nation's economic interests in a rapidly changing world.
