Full Breakdown
RBI Steps Up Dollar Sales to Support Rupee Amid Policy-Driven Inflows
9/7/2026, 2:23:26 PM
Core Intervention in Early September
In the week ending September 4, the Reserve Bank of India (RBI) sold at least $8 billion of U.S. dollars in the foreign-exchange market, according to six bankers familiar with the operations. Estimates of the total sales vary: one source placed the figure around $15 billion, while another from a state-run lender quantified it at $10-$11 billion, roughly three times the volume of the prior week. The interventions helped lift the rupee to a two-month high of 94.2850 per dollar on September 3.
Drivers: Policy-Driven Dollar Inflows and Hedging Facilities
The RBI’s capacity to intervene stems from a surge of policy-driven dollar inflows. A discounted hedging facility for overseas borrowings by state-run firms and banks, together with a cost-free hedging facility for banks to raise overseas FX deposits, have attracted more than $136 billion in inflows. These inflows expanded the central bank’s market presence, which bankers estimate between $8 billion and $15 billion.
Quantitative Snapshot
- FX reserves stood at an all-time peak of $740.8 billion through August 21; J.P. Morgan says the figure has likely risen past $750 billion.
- Dollar sales in the week to September 4 ranged from $8 billion (minimum reported) to $15 billion (upper estimate).
- The rupee’s appreciation moved from a May low of 96.96 to 94.2850 on September 3.
Market Consequences
Selling dollars drains rupee liquidity from the banking system, which recently hit a record high. Excess liquidity can depress interbank borrowing costs below the policy rate, potentially weakening the transmission of monetary policy. Analysts note that while the rupee’s rebound reflects the RBI’s aggressive stance, it may not signal a sustained appreciation cycle. Goldman Sachs projects the currency to remain in a narrow range, citing limited upside from stronger external balances.
Analyst Commentary
J.P. Morgan attributes the heightened intervention to “increased near-term ammunition,” aiming to push the rupee stronger and attract exporters. Goldman Sachs cautions that stronger external balances alone are unlikely to generate a lasting upside for the rupee.
