India’s central bank may have offloaded a portion of its gold holdings to shield its foreign-currency assets from the cascading fallout of the war in the Middle East, according to an analysis by Bloomberg Economics based on publicly available data.

The Reserve Bank of India likely sold gold reserves worth roughly $12 billion in the two weeks through May 22, while buying $7.5 billion of foreign-currency assets, BE’s senior India economist, Abhishek Gupta, wrote. The fall came despite a hike in import duties on the precious metal, which should have boosted the value of the bank’s bullion and dollars. This suggests the RBI was selling gold, according to Gupta.

The RBI did not immediately respond to an email seeking comment.

The purported sales underscore policymakers’ concerns about the pressure India is facing from sustained capital outflows and higher oil prices as the Iran war and effective closure of the Strait of Hormuz drag on. They also show the RBI is prioritizing reserves of liquid foreign currency as a wider current-account deficit weighs on the rupee. 

Governor Sanjay Malhotra is weighing all options available to stabilize the rupee, including an interest-rate hike and raising dollars from investors overseas, Bloomberg News reported earlier.

The RBI’s interventions in the foreign exchange markets have had some effect, helping the rupee outperform most peers in Asia since May 20, when the currency fell to an all-time low. The rupee was down 0.2 per cent to 95.17 on Tuesday.

As the world’s third-largest oil importer, India is burning through foreign currency as the West Asia war inflates its energy bill and batters the local currency. 

The government has ramped up efforts to curb foreign outflows and cushion its economy from the fallout of the war, including hiking fuel prices, and more than doubling import duties on precious metals. Authorities are expected to unveil further measures to shore up the rupee as soon as this week. 

The RBI will likely continue rebuilding forex reserves wherever conditions allow, according to Gupta. “Periods of dollar weakness, renewed foreign-capital inflows, or lower oil prices would create opportunities to add to foreign-currency assets,” he wrote. 

By the end of March, the central bank held 880.52 metric tons of gold, of which 77 per cent was held domestically. Six months earlier it kept 66 per cent of its gold locally. Most of its overseas holdings are with the Bank of England and the Bank for International Settlements, the RBI said in its half yearly foreign exchange report in April.

The sharp jump in gold repatriation in recent years indicates the RBI, like other emerging market central banks, has been increasingly concerned about the exposure of its reserves held overseas after Russia’s assets were frozen by the West. 

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Published on June 2, 2026