Did RBI deploy $80 billion to defend rupee? SBI economist explains the numbers

The Reserve Bank of India (RBI) may have deployed around $75-80 billion through foreign-exchange operations to support the rupee, according to market estimates cited by State Bank of India’s Group Chief Economic Adviser Soumya Kanti Ghosh. However, the actual amount used for intervention could be significantly lower, as foreign-currency mobilisation and associated swap transactions have also affected the central bank’s balance sheet, Ghosh clarified.

The estimate comes amid sustained pressure on the rupee and a sharp reversal in India’s foreign exchange reserves after they touched a record high in September.

According to the RBI’s weekly data, foreign currency assets fell from a peak of approximately $648.2 billion on September 4 to $597.6 billion on October 9, a decline of around $50.6 billion. Total foreign exchange reserves stood at $726 billion as of October 9.

In a note, Ghosh said the special FCNR(B) deposit scheme and other foreign-currency mobilisation measures introduced on June 8 had attracted inflows of approximately $143 billion as of September 18. Market estimates suggest that nearly half of these funds, or around $75-80 billion, may have been deployed through foreign-exchange operations to support the rupee.

However, the $75-80 billion figure is an estimate, not a confirmed measure of RBI intervention.

The decline in foreign currency assets is an important indicator of pressure on the RBI’s external buffers, but it cannot be treated as a direct measure of the dollars sold to defend the rupee.

Foreign currency assets can change because of intervention in the spot market, valuation movements and transactions linked to forward and swap contracts. The RBI’s foreign-currency mobilisation measures have added another layer of complexity to the assessment.

Ghosh noted that foreign currency assets remained around $61 billion above their June 5 level of $543.4 billion as of October 2, despite the decline from their September peak.

The RBI’s forward book also points to a more complicated picture. Its net short dollar position in outstanding forward contracts rose to a record of approximately $200 billion at the end of August, from $136.8 billion at the end of July. The increase was largely associated with foreign-currency inflows mobilised through the FCNR(B) measures and related swaps.

A short dollar position in the forward market represents a future obligation to deliver dollars against rupees. It is not equivalent to dollars already sold in the spot market.

Ghosh pointed out that the RBI’s net short position in forward contracts maturing within three months improved to around $1.1 billion in August, declining by approximately $30 billion cumulatively since June.

Meanwhile, its net short position in contracts maturing beyond one year expanded sharply, from $91 billion in July to $176 billion in August.

This divergence suggests that the expansion in the forward book reflects not just currency intervention but also future obligations arising from foreign-currency mobilisation and associated swaps.

What do the numbers tell us about the RBI’s defence of the rupee?

The available data show that the RBI has been managing sustained currency pressure through a combination of foreign-exchange intervention, deposit mobilisation and swap operations. However, they do not establish a definitive cumulative dollar amount spent defending the rupee.

The distinction matters because foreign currency mobilised through FCNR(B) deposits and related measures does not necessarily represent an outright addition to the RBI’s unencumbered reserves. Such funds may carry future repayment or swap obligations.

The RBI’s published monthly data on dollar purchases and sales provide a more direct indication of its net transactions in the foreign-exchange market. However, these figures also cover operations undertaken for purposes other than defending a particular exchange-rate level. They should therefore be assessed alongside reserve movements and the forward book rather than treated as interchangeable measures.

Despite the decline in foreign currency assets, Ghosh’s assessment suggests that India’s overall external buffers remain adequate under stressed scenarios.

His analysis, based on Keynesian precautionary and transaction motives for holding reserves, estimates India’s reserve requirement under stress at $596 billion, compared with current reserves excluding gold. The renewed India-Japan Bilateral Swap Arrangement, effective February 28, 2026, raises the estimated effective reserves available under extreme market stress to $679 billion.

Including gold holdings, India’s overall reserve position remains more than sufficient under this assessment.