Reserve Bank of India Deploys Half of $140 Billion Forex War Chest to Stabilize Rupee
The Reserve Bank of India has utilized nearly $80 billion of its $140 billion foreign exchange haul to defend the rupee amid ongoing market volatility.
POLICY WIRE — Mumbai, India — The Reserve Bank of India has utilized approximately half of the $140 billion in capital it secured through special measures to protect the rupee from significant market pressure, according to estimates from banking professionals.
Since the implementation of these special initiatives on June 8, the central bank has deployed between $75 billion and $80 billion. This capital has been funneled into the market through a combination of spot dollar sales and dollar-rupee swaps.
The scale of this intervention follows a period of intense volatility in fiscal year 2026, during which the RBI executed its most substantial defense of the currency in 15 years. That effort saw the bank spend more than $53 billion to counter headwinds caused by geopolitical instability, elevated oil prices, and a surge in foreign capital outflows.
Official data released on Wednesday confirmed that India successfully attracted $136.38 billion in foreign inflows via these special schemes, a figure that significantly exceeded initial expectations and bolstered the nation’s foreign exchange reserves.
Beyond direct currency defense, the central bank has also utilized $10 billion in foreign exchange swaps to manage liquidity and mitigate inflation risks stemming from a substantial cash surplus within the financial system.
Looking ahead, the RBI faces the complex task of unwinding its large bearish dollar positions. Officials are currently trimming these short dollar forward holdings, a process that requires careful management to prevent potential destabilization of the currency markets as analysts forecast continued pressure on the rupee throughout the year.
Reporting by Policy-Wire (PW)
