India Dumps 21% of US Treasuries in 2025, First Cut in Four Years

According to Bloomberg data, India reduced its holdings of US Treasury notes by nearly 21 percent between October 31, 2024, and October 31, 2025. Holdings fell to $190.7 billion from $241.4 billion, marking the first annual decline in four years. Until now, India’s exposure to US Treasuries had either risen or stayed largely stable.

This reduction comes despite attractive US bond yields. The 10-year US Treasury yield traded between 4.0 and 4.8 percent, levels that usually support strong foreign demand. However, economists believe yield was not the key driver behind India’s decision. Instead, the move reflects a strategic rethink of India’s foreign exchange reserve allocation.

“This clearly signals India’s shift towards diversification in its forex strategy,” said Dipanwita Mazumdar, Economist at Bank of Baroda. She added that India is gradually reducing its dependence on the US dollar, especially as the dollar index (DXY) shows a softer trend amid signs of weakness in the US labour market.

Expectations of a future US Federal Reserve rate-cut cycle, combined with rising global geopolitical risks, have pushed central banks worldwide to reassess reserve composition. The Reserve Bank of India (RBI) appears to follow this broader global trend.

Market participants expect India to reallocate reserves into gold, non-dollar currencies, and other sovereign bonds. Gold has regained importance globally due to its ability to hedge against currency volatility, inflation, and geopolitical shocks.

“In today’s uncertain global environment, higher gold holdings by the RBI look likely,” Mazumdar noted.

India’s evolving forex strategy highlights a broader shift among emerging economies, which now seek better balance between safety, liquidity, and returns while lowering concentration risk. While the US dollar will remain dominant, India’s move reflects a more calibrated and resilient approach to FINANCE and STOCKMARKET stability.