What are US Treasuries?India’s Reduction in US Treasuries:

India’s Reduction in US Treasuries:

The central theme is a significant reduction in India’s exposure to US debt, signaling a “cautious shift” in reserve strategy.

• Total Reduction: India’s holdings dropped by $42.8 billion (18.96%) in 2025.

• Holding Value: Holdings fell from $225.7 billion in January 2025 to $182.9 billion by December 31, 2025.

• Global Standing: India is now the 15th largest holder of US Treasuries.

• Contextual Comparison: The reduction of $182.9 billion is notably higher than India’s net government borrowing of ₹11.73 lakh crore proposed in the Union Budget for 2026-27.

Global Landscape: Top 10 Holders:

While India reduced its holdings, other nations reacted differently. The table below summarizes the top holders as of the end of 2025:

Rank	Country	Amount (in $ Billion)	Trend Note
1	Japan	1,185.5	Increased from $1,079.3B
2	UK	866.0	Increased from $740.2B
3	China	683.5	Decreased from $760.8B
4	Belgium	477.3	–
5	Canada	468.1	–
6	Luxembourg	435.1	–
7	Cayman Islands	421.2	–
8	France	368.9	–
9	Ireland	340.7	–
10	Taiwan	310.6	–
15	India	182.9	Significant Reduction

Strategic Motivations & Economic Context:

The Reserve Bank of India (RBI) is diversifying its portfolio to balance liquidity, security, and returns.

1. Diversification of Assets

The RBI is moving away from a US-centric portfolio by increasing investments in:

• Gold: Aided by a spurt in value, India’s forex reserves jumped by $90 billion year-on-year to $725.72 billion.

• Sovereign Debt & Supranational Bonds: Shifting to other highly-rated entities.

• Foreign Deposits: Significant funds are placed with the Bank for International Settlements (BIS) and other commercial banks overseas.

2. Geopolitical & Trade Tensions

• Tariffs: The report mentions trade tensions and a 15% across-the-board duty on imports imposed by the US.

• Sanctions Risks: The article references the freezing of Russia’s reserves following the invasion of Ukraine as a “lesson” for countries to ensure their reserves are not overly dependent on a single asset class or geography.

3. Market Stability

US Treasuries are still considered among the safest assets globally, but the RBI is applying “stringent criteria” to ensure the safety and liquidity of India’s reserves amid global financial uncertainty.

What are US Treasuries?

Think of a US Treasury as a “loan” that you (or a country) give to the United States government. When the US government needs money to fund its budget, pay for infrastructure, or manage its debt, it issues these securities to the public.

• The Deal: You give the US government cash now; in return, they promise to pay you back the full amount plus a fixed amount of interest over a specific period.

• Safety: They are considered the safest investment in the world because they are backed by the “full faith and credit” of the US government, which has never defaulted on its debt.

• Types: They come in different “maturities” (lengths of time), ranging from Treasury Bills (a few days to a year) to Treasury Bonds (up to 30 years).

How does India invest in them?

India doesn’t “buy” them like an individual buying a stock. The process is managed by the Reserve Bank of India (RBI) as part of managing the country’s Foreign Exchange (Forex) Reserves.

The Mechanism

1. Forex Surplus: When India earns more foreign currency (mostly US Dollars) through exports or foreign investment than it spends on imports, the RBI collects these dollars.

2. Productive Use: Keeping billions of dollars in “cash” under a metaphorical mattress earns zero interest. To make that money work, the RBI buys US Treasuries.

3. Indirect Lending: As the article states, this is effectively India lending money to the US government.

4. Liquidity: Because US Treasuries are so easy to sell, if India suddenly needs billions of dollars (to stabilize the Rupee or pay for a crisis), the RBI can sell these Treasuries instantly for cash.