RBI May Limit Aggressive Dollar Sales As Rupee Falls Beyond 95 Against U.S. Dollar

The Reserve Bank of India (RBI) may avoid large-scale intervention in the currency market even after the rupee touched a fresh record low against the U.S. dollar amid elevated crude oil prices and continued geopolitical tensions in West Asia.

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The rupee weakened to an all-time low of ₹95.40 per dollar on May 5 as Brent crude prices remained above $110 per barrel. Rising oil prices have increased pressure on the domestic currency due to higher import costs and stronger dollar demand from oil importers.

According to RBI data, India’s foreign exchange reserves stood at $698 billion as of April 24. The reserves had previously touched a record high of nearly $728 billion.

RBI May Focus On Slowing Volatility

Market participants said the RBI may focus on reducing sharp volatility in the rupee instead of defending a specific exchange rate level.

The rupee first crossed the ₹95 per dollar mark on March 30 after the RBI introduced revised guidelines for net open positions in the currency market. The currency later recovered to around ₹92.50 per dollar before weakening again in recent sessions.

Recent pressure on the rupee has also coincided with higher crude oil prices and sustained foreign fund outflows from Indian equities.

Data from the RBI’s monthly bulletin showed the central bank became a net buyer of dollars for the second straight month. The RBI purchased $7.4 billion in February after buying $2.5 billion in January.

FCNR Deposits Under Discussion

One of the measures being discussed in financial markets is the possible return of the Foreign Currency Non-Resident Bank, or FCNR(B), deposit scheme.

The FCNR(B) route was introduced in 2013 to attract overseas dollar deposits during a period of currency volatility. The scheme had brought around $30 billion into the banking system at the time.

Moneycontrol reported taht under that framework, the RBI had provided a special swap window for banks to exchange dollar deposits with the central bank at concessional rates.

Market participants also indicated that policy measures aimed at improving foreign investment inflows into equities and government bonds are being discussed.

Oil Prices Continue To Pressure Rupee

The rupee has remained under pressure as Brent crude prices stayed above $100 per barrel following tensions involving the U.S., Iran and Israel.

Foreign portfolio investors have also withdrawn more than $20 billion from Indian equities in 2026 so far, according to market estimates.

RBI data further showed that the central bank’s short dollar positions in the foreign exchange market rose to a record $104 billion in March.

Currency markets are expected to continue tracking crude oil prices, capital flows and RBI actions as the rupee trades near record low levels against the U.S. dollar