MediumIV Macro Policy & Sovereign Debt23 October 2026, Friday
India's reserves shed $64.7bn in six weeks as bond yields climb
Data released by the Reserve Bank of India (RBI) on 23 October show foreign exchange reserves fell by $5.01 billion in the week to 16 October to $721.02 billion. The 10-year benchmark bond yield rose to 7.46% on 22 October.
According to the Daily Excelsior, $5.76 billion of the decline came from foreign currency assets, while gold reserves rose by $706 million to $105.8 billion. Reserves hit a record $785.71 billion in the week of 4 September. By WCRC Leaders' calculation, six straight weekly declines since then add up to $64.69 billion, although the weekly losses have been shrinking for 3 weeks. Experts attribute the fall to banks drawing on FCNR(B) funds, the foreign currency deposits of non-resident Indians, and to the RBI selling dollars to defend the rupee.
The bill is showing up in the bond market. According to WCRC Leaders, the RBI auction yield on the 2036 benchmark rose from 6.7275% on 3 July to 7.3955% on 16 October, while its price fell from 101.50 to 96.91 rupees. The RBI raised the repo rate by 25 basis points to 5.50% on 7 October, and announced open market bond sales totalling 1.25 lakh crore rupees on 11 September and 9 October.
At the 23 October auctions, the 2031 bond sold at 7.3589% and the 2066 bond at 7.9339%. The October 2026–March 2027 calendar envisages 7.86 lakh crore rupees of supply across 23 weekly auctions. The FBIL reference rate on 23 October was 94.9432 rupees to the dollar. WCRC Leaders expects the 10-year yield to stay above 7.25% until reserve losses stop and the RBI's 2–4 December decision becomes clear. That is the view of a consultancy, and the six-week total could not be independently verified.
Talay assessment
Bottom line
New Delhi is choosing a stable rupee over cheap money, and the bond market is paying the price. The $64.7 billion reserve loss over 6 weeks is slowing, but a 7.46% yield is pushing up borrowing costs for the state and companies alike. The likeliest path is a shrinking but continued reserve drain, with yields staying high until the December meeting.
Likely effects
- Government borrowingNegative1–6 months
If the second-half auction calendar of 7.86 lakh crore rupees is funded at high yields, the central government's interest burden rises.
- Corporate creditNegative1–6 months
The repo hike and bond sales will feed into bank lending rates within a few months, making investment finance more expensive.
- RupeePositiveWeeks
Shrinking weekly reserve losses suggest the RBI's capacity to hold the rupee around 95 remains intact for now.
Possibilities, ranked
- 1A slowing drain55%
Weekly reserve losses fall below $5 billion and the 10-year yield stays above 7.25%.
Watch: RBI reserve data for the week to 23 October, due on 30 October
- 2Pressure builds again30%
The oil bill and capital outflows erode reserves rapidly again, and the RBI hikes once more in December.
Watch: A weekly reserve loss exceeding $10 billion
- 3Yields retreat15%
Oil prices and reserve losses stabilise, and the bond market recovers.
Watch: The 10-year yield falling below 7.1%
Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.
Market reaction
Indicators affected
- Indian FX reserves▼ $721.02bn
- 10Y yield (22 Oct)▼ 7.46%
- Loss from peak▼ $64.7bn