Reserve Bank of India Deploys Aggressive Measures to Stabilize Rupee

The Reserve Bank of India implemented its most aggressive measures in over a decade to support the rupee, leading to the currency's largest gain in six months on Monday. To stabilize the exchange rate, the central bank opened a direct dollar-supply window for three state-owned oil marketing companies to remove $10–$12 billion in monthly demand from the spot market. Other interventions included raising the daily cash reserve ratio maintenance requirement to 99 percent and conducting open market operation sales totaling Rs 25,000 crore.

To prevent the misuse of hedging facilities, the central bank also tightened documentation for foreign exchange derivative transactions. SBI Research predicts the rupee may still test the 94.50 level against the US dollar in the near term, warning that the balance-of-payments surplus is expected to narrow to approximately $55–$60 billion in the 2026-27 financial year.

Despite the short-term recovery, the rupee remains pressured by volatile capital flows, twin deficits, and a heavy reliance on imported energy. With inflation approaching the upper limit of the central bank's tolerance band, economists warn that the Reserve Bank of India may be forced to implement aggressive interest rate hikes. SBI Research concludes that long-term structural fiscal and tax reforms are necessary to restore investor confidence and revive foreign capital inflows.