Amid trade tensions with America several months now, India has reduced its exposure to US Treasuries in calendar year 2025 (CY25), signalling a cautious shift in the country’s foreign exchange reserve strategy.
According to US Department of Treasury data, India’s holdings in US securities have come down by $42.8 billion, or 18.96%, from $225.7 billion in January 2025 to $182.9 billion as of December 31, 2025. The reduced holding is more than enough to cover India’s net government borrowing of Rs 11.73 lakh crore as proposed in the Union Budget for 2026-27.
India, which is now the 15th largest holder of US Treasuries, had held $247.2 billion in September 2024, before cutting down gradually over the last several months. In December alone, India’s holding had come down by $3.6 billion.
India’s investment in American securities technically means it is lending money to the US government indirectly. As the US government needs money to fund spending in the case of defence, healthcare, infrastructure, among other heads, it issues Treasury securities and countries like India buy them. That money goes into the US government’s financing pool.
Significantly, China has also reduced its US Treasury holding from $760.8 billion to $683.5 billion during CY25. However, Japan, the largest holder of US securities, increased its holding from $1,079.3 billion to $1,185.5 billion. The UK increased its holdings of US Treasuries from $740.2 billion to $866 billion, as per US Treasury Department TIC data.
With foreign exchange reserves touching new highs, the calibrated reduction in US securities by the Reserve Bank of India — which manages India’s foreign reserves — and the rise in gold holdings reflect its cautious approach amid global financial uncertainty. By spreading investments across sovereign debt, supranational bonds, deposits and gold, the RBI’s aim is to apparently strike a balance between liquidity, security and returns while safeguarding the financial stability.
Meanwhile, aided by the spurt in the value of gold holdings, India’s forex reserves jumped by $90 billion on a year-on-year basis to $725.72 billion as of February 13, 2026. It holds gold reserves worth $128.46 billion now, a rise of $54 billion in a year.
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The reduction in India’s holdings came amid speculation that US President Donald Trump, who imposed steep tariffs on Indian imports last year, could bring restrictions on investments by countries which don’t sign agreements with America. Following Russia’s invasion of Ukraine, the US and its allies blocked Moscow’s access to a significant share of its foreign reserves held overseas, including dollar and euro-denominated assets. The episode showed that, in extreme circumstances, the US can effectively cut off a country’s access to its Treasury holdings through the US financial system.
India and the US recently announced a trade deal before the US Supreme Court struck down the tariffs imposed by Trump and he imposed an across the board 15% duty on all imports.
The Reserve Bank says its investments in bonds/ Treasuries represent debt obligations of highly rated sovereigns, central banks and supranational entities. “Further, deposits are placed with central banks, the BIS and commercial banks overseas. RBI has framed requisite guidelines for selection of issuers/ counterparties with a view to enhancing the safety and liquidity aspects of the reserves. The RBI continues to apply stringent criteria for selection of counterparties,” it said in the half yearly report on management of forex reserves.
Apart from investment in securities, other allocations include deposits with central banks and the Bank for International Settlements (BIS), alongside physical gold. This broad diversification ensures that India’s reserves are not overly dependent on one asset class or geography. Out of the total foreign currency assets of $579.18 billion, $489.54 billion was invested in securities, $ 46.11 billion was deposited with other central banks and the BIS and the balance $43.53 billion comprised deposits with commercial banks overseas as of September 2025, according to RBI data.
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US Treasury securities, issued by the Department of Treasury to finance the government’s spending needs, are considered one of the safest investments because they are backed by the US government. They’re issued in different maturities, ranging from a few days to 30 years, allowing investors to choose the term that best fits their investment goals, according to Vanguard Group.
US Treasuries are usually sold at auction, and their prices are determined by market demand. They offer a fixed rate of return, making them a stable investment option. Interest earned from Treasury securities is exempt from state and local taxes. “Treasury securities are used as a benchmark for other interest rates, making them an important indicator of the overall economy,” it said.
Central banks and sovereign wealth funds invest significantly in US Treasury securities, viewing them as among the world’s safest and most liquid assets. The yield on the US 10-year Treasury note is holding steady at approximately 4.08%, down by 35 basis points in the last one year.
