RBI Short Position Limits Indian Rupee Appreciation

The Reserve Bank of India holds a net short position of USD 239 billion in the forward market as of September 2026. This position is expected to limit the appreciation of the Indian rupee even as foreign portfolio investor inflows recover.

According to research from IDFC First Bank, the central bank must accumulate dollars to meet commitments as buy-sell swaps mature, which effectively absorbs incoming capital. Approximately USD 40 billion matures within one year, while USD 143 billion is linked to the FCNR (B) scheme with maturities spanning three to five years. This financial commitment also restricts the ability of the central bank to sell dollars in the spot market.

IDFC First Bank forecasts the rupee will trade between 92 and 94 per US dollar by December 2026, with a potential decline to 96 by June 2027. While a potential agreement between the United States and Iran or corrections in American AI stocks could support the currency, high US Treasury yields and global competition for capital continue to act as headwinds.