Forward of US President Donald Trump’s resolution to slap a 50 per cent tariff on Indian imports, India had pared down its publicity to US Treasury Payments (T-bills) over the previous 12 months, signalling a cautious shift within the Reserve Financial institution of India’s (RBI) overseas trade reserve technique. This development may get extra pronounced going ahead, despite the fact that there are a number of elements that might come into play because the trade-off is debated within the coverage circles.
In response to US Division of Treasury knowledge, India’s holdings in US securities had peaked at $247.2 billion in September 2024, earlier than sliding regularly to about $219.1 billion by December 2024. India, the Tenth-largest investor in T-bills, held round $227 billion in US Treasury securities as of June 2025, in contrast with $242 billion in June 2024. The decline of about $20 billion since September final 12 months displays a measured discount unfold over a number of months.
With President Trump imposing steep tariffs on Indian imports, a urgent query arises: may Washington take additional steps focusing on India’s huge investments in US securities? The precedent isn’t far behind — after Russia’s invasion of Ukraine, the US and its allies moved swiftly to freeze Moscow’s entry to its overseas reserves, based on market sources.
Analysts say that the US has the power to freeze or limit entry to Treasury securities in distinctive circumstances, usually pushed by geopolitical or nationwide safety issues. Following Russia’s invasion of Ukraine, Washington and its allies blocked Moscow’s entry to a big share of its overseas reserves held abroad, together with dollar- and euro-denominated belongings. The episode underscored that, in excessive circumstances, the US can successfully lower off a rustic’s entry to its Treasury holdings via the US monetary system. A uncommon occasion with little precedent, however a theoretical risk.
The RBI’s personal knowledge does replicate a moderation of types. India’s total holdings in international securities and T-bills fell to $485.35 billion in March 2025, from $515.24 billion in September 2024, resulting in a decline in total overseas forex belongings to $ 567.55 billion. The RBI is but to publish knowledge as of August 2025.
Sharp rise in gold reserves
On the similar time, the central financial institution has adjusted its gold reserves. RBI knowledge reveals that gold held overseas declined to 348.62 tonnes in March 2025, in contrast with 387.26 tonnes a 12 months earlier. Domestically, the RBI held 511.99 tonnes in March 2025, a pointy rise from 408.10 tonnes in March 2024. This rebalancing highlights the RBI’s twin method of diversifying belongings whereas sustaining enough liquidity.
India’s foreign exchange reserves jumped by $3.51 billion to $694.23 billion for the week ended August 29.
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Central banks and sovereign wealth funds make investments considerably in US Treasury securities, viewing them as among the many world’s most secure and most liquid belongings. Backed by the US authorities, Treasuries kind a part of the biggest and most lively bond market globally.
Key traders in US Treasury securities
Japan is the biggest investor in US Treasury securities at $1,147 billion, adopted by the UK at $858.1 billion and China at $756.4 billion, as per US Treasury Division’s TIC knowledge. The yield on the US 10-year Treasury word is holding regular at roughly 4.10 per cent, having paused a latest decline as markets await upcoming inflation reviews.
China which held round $1.3 trillion of US treasury securities has regularly lowered the holding to the $756 billion degree during the last couple of years.
The RBI’s overseas trade reserve administration continues to prioritise security, liquidity, and return—in that order. Investments in T-bills and authorities bonds symbolize the debt obligations of extremely rated sovereigns, central banks, and supranational establishments.
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Treasury securities are notably enticing due to their depth and liquidity. Because the RBI itself notes, these devices can typically be liquidated in massive volumes with out inflicting sharp value distortions out there, making them perfect automobiles for managing reserves.
Whereas the US stays the biggest vacation spot for India’s reserve investments, the RBI additionally holds high-rated authorities securities from nations akin to Japan, Germany, France, and the UK. Moreover, a portion of reserves is parked in bonds issued by multilateral establishments just like the World Financial institution, the Worldwide Financial Fund (IMF), and the Asian Improvement Financial institution (ADB).
Different allocations embrace deposits with central banks and the Financial institution for Worldwide Settlements (BIS), alongside bodily gold. This broad diversification ensures that India’s reserves should not overly depending on one asset class or geography.
With overseas trade reserves touching new highs in 2025, the RBI’s calibrated discount in US T-bills and realignment of gold holdings displays its cautious method amid international monetary uncertainty. By spreading investments throughout sovereign debt, supranational bonds, deposits, and gold, the RBI goals to strike a steadiness between liquidity, safety, and returns whereas safeguarding the nation’s monetary stability.