The RBI is estimated to have sold nearly $12 billion worth of gold reserves in the two weeks through May 22 while purchasing around $7.5 billion in foreign currency assets, according to a Bloomberg Economics analysis.
The move suggests the central bank may be prioritising liquid foreign currency reserves to manage rising dollar demand, capital outflows, and pressures on the current account.
The reported shift comes as the rupee remains under pressure from elevated crude oil prices, geopolitical tensions in West Asia, and sustained foreign portfolio investor outflows.
The Reserve Bank of India (RBI) is likely to have offloaded a portion of its gold holdings to protect its foreign currency assets from the adverse impact of the conflict in West Asia, according to an analysis by Bloomberg Economics.
The central bank is estimated to have sold nearly $12 billion worth of gold reserves in the two weeks through May 22, while simultaneously purchasing about $7.5 billion in foreign currency assets, Bloomberg reported.
1 May 2026
Get the latest issue of Outlook Business
According to the report, the decline in reserves occurred despite an increase in import duties on precious metals.
Typically, a hike in import tariffs tends to boost the valuation of gold reserves and dollar assets. Therefore, the fall in reserves suggests that the RBI may have sold part of its gold holdings during the period.
The data underscores the challenges facing policymakers as India grapples with capital outflows, rising crude oil prices, and heightened geopolitical uncertainty in West Asia.
According to official data, the RBI held 880.52 metric tonnes of gold as of the end of March, with 77% of the holdings stored domestically.
Six months earlier, 66% of the central bank's gold reserves were held within the country. Most of the overseas holdings are kept with the Bank of England and the Bank for International Settlements (BIS).
Furthermore, the report noted that the likely sale of gold indicates that the RBI is prioritising liquid foreign currency reserves, potentially to manage a widening current account deficit and meet growing dollar demand from importers and foreign investors exiting Indian markets.
Several media reports have suggested that the RBI is evaluating multiple options to stabilise the rupee, including speculation about a possible interest rate hike at the upcoming Monetary Policy Committee (MPC) meeting on June 5.
However, conflicting reports citing economists and market experts suggest that a rate hike remains unlikely, despite pressure on the domestic currency.
The Falling Rupee
The rupee was among the worst-performing major currencies in 2025, depreciating nearly 10% against the US dollar.
So far in 2026, it has fallen by around 6%, weighed down by geopolitical tensions, elevated crude oil prices, and sustained foreign portfolio investor (FPI) outflows.
The RBI has consistently intervened in the foreign exchange market to moderate the pace of the rupee's depreciation.
Apart from the central bank, the Centre has also stepped up efforts to contain foreign capital outflows and mitigate the economic risks arising from the West Asia crisis.
The government has raised fuel prices and increased import duties on precious metals. According to the report, regulators may announce additional measures to support the rupee as early as this week.
According to Bloomberg Economics economist Abhishek Gupta, the RBI is likely to continue rebuilding foreign exchange reserves whenever conditions permit, particularly during periods of a weaker US dollar, fresh capital inflows, and lower crude oil prices.
