How the RBI is Defending A Falling Rupee Against the Dollar

The rupee has touched an All-Time-Low of ~93 against the dollar.

To support the weakening rupee, RBI has ramped up its “net-short dollar book” to record $100 billion—up from $67.8 billion in January.

How it is done.

Instead of directly selling dollars from its $717 billion cash reserves, the RBI is intervening via derivative contracts.

This shields against immediate depletion in reserves while still influencing the exchange rate.

This isn’t new — RBI was already intervening to support the rupee even before the West Asia conflict broke out amid the equity outflows driven by US tariffs.

A large part of this intervention is in offshore markets through Non-Deliverable Forwards (NDFs).

The RBI has been selling dollars via short-dated contracts, typically maturing within weeks to a month.

Onshore, to supplement this, RBI has used buy-sell swaps, including longer-tenor contracts, to help offset the impact of RBI intervention.

This isn’t an immediate fix — the growing derivative book may put pressure on the rupee later, as it will create dollar demand and could limit sustained recovery, Barclays Plc strategists, including Mitul Kotecha, wrote in a note Tuesday.