Story perspectives

RBI launches $15bn swap spree, hikes rates to support rupee

5/22/2026

Summary

**RBI Defends Rupee**

RBI Governor Sanjay Malhotra announced interest-rate hikes, swap auctions and dollar-raising steps to defend the rupee.
The RBI deployed $15 billion of USD/INR swaps, injecting about 1.3 lakh crore rupees after the rupee fell to a low of nearly 97 per dollar.
JPMorgan economist Sajjid Chinoy warned that a hedging spiral could worsen pressure, noting that 2026 foreign-portfolio outflows have exceeded last year’s $19 billion record and urging structural reforms beyond rate hikes.

Summary

**RBI Looks Through**

RBI Governor Sanjay Malhotra told an IMF event on May 18 the RBI will “look through” temporary supply shocks.
The rupee rose 41 paise to 96.45 on May 21 after President Donald Trump said Iran talks were in final stages.
RBI officials, including Malhotra, met on May 20 after the rupee fell to 96.95 to consider options.
Traders said investors stay cautious while watching West-Asia geopolitical risk and oil-price swings.

Summary

**Panagariya Urges Fall**

Arvind Panagariya, former Niti Aayog vice-chairman, urged the RBI to let the rupee fall from Rs 100 per dollar.
He warned that reliance on high-interest NRI dollar deposits and sovereign dollar bonds shifts wealth to richer depositors and drains reserves.
The late-February Strait of Hormuz closure after US-Israeli strikes cut crude supplies, widening India’s import bill and deepening its foreign-exchange drain.

Summary

**RBI Sells Dollars**

On May 21, 2026, the RBI sold dollars via state-run banks before the market opened to halt the rupee’s slide.
The pre-open sale pushed the on-shore spot rate to 96.30 per dollar, a 0.5 % gain.
On the interbank order-matching system the rupee rose about 70 paise in minutes, briefly hitting 95.30 before easing.
The RBI said its interventions aim to curb volatility, not defend a specific exchange-rate level.

History

Historical Context

The 1997-98 Asian financial crisis led many Asian central banks to sell foreign exchange to steady their currencies. India’s Reserve Bank later injected $1.32 billion in a 2008 refinance operation, illustrating the continued reliance on market-stabilising tools. The crisis showed that swift FX intervention can curb sharp depreciation and restore confidence.

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**RBI Defends Rupee**

RBI Governor Sanjay Malhotra announced interest-rate hikes, swap auctions and dollar-raising steps to defend the rupee.
The RBI deployed $15 billion of USD/INR swaps, injecting about 1.3 lakh crore rupees after the rupee fell to a low of nearly 97 per dollar.
JPMorgan economist Sajjid Chinoy warned that a hedging spiral could worsen pressure, noting that 2026 foreign-portfolio outflows have exceeded last year’s $19 billion record and urging structural reforms beyond rate hikes.

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