RBI spent ₹2.7 lakh cr to prevent rupee from falling, it still fell to record lows: Report
The Indian rupee has been experiencing a tumultuous few months, with its value plummeting to record lows against the US dollar. In an effort to soften the fall, the Reserve Bank of India (RBI) has spent a whopping ₹2.7 lakh crore ($30 billion) in the foreign exchange market. However, despite this significant intervention, the rupee has continued to tumble, leaving many to wonder about the effectiveness of the RBI’s strategy.
According to a report by SBI Research, the RBI has intervened in the forex market to the tune of around $18 billion between June and September. Additionally, the research firm estimates that the central bank has spent another $10 billion in October 2025, taking the total expenditure to $30 billion. This massive spending is aimed at preventing a sharp decline in the value of the rupee, which has been under pressure due to a combination of factors, including a strong US dollar, rising crude oil prices, and a widening trade deficit.
The RBI’s intervention in the forex market is not a new phenomenon. The central bank has been actively managing the exchange rate for several years, using its foreign exchange reserves to prevent excessive volatility in the currency market. However, the scale of the current intervention is unprecedented, highlighting the severity of the challenges facing the Indian economy.
Despite the RBI’s best efforts, the rupee has continued to fall to new record lows. On several occasions, the currency has breached the 83 mark against the US dollar, causing concern among exporters, importers, and investors. The falling rupee has made imports more expensive, which has contributed to higher inflation and reduced the competitiveness of Indian exports.
So, why has the RBI’s intervention failed to stem the decline of the rupee? One reason is that the central bank’s actions are being offset by the strong US dollar, which has been gaining strength against most major currencies. The US Federal Reserve’s decision to raise interest rates has made the US dollar more attractive to investors, leading to a surge in capital outflows from emerging markets, including India.
Another reason is that the RBI’s intervention is not a long-term solution to the problem. While it can provide temporary relief, it does not address the underlying issues that are driving the decline of the rupee. These include a widening trade deficit, which is largely due to a surge in imports, and a decline in foreign investment, which has reduced the supply of dollars in the market.
To stem the decline of the rupee, the government and the RBI need to take more decisive action to address the underlying issues. This could include measures to reduce the trade deficit, such as increasing exports and reducing imports, as well as policies to attract more foreign investment. Additionally, the RBI could consider allowing the rupee to depreciate further, which would make Indian exports more competitive and help to reduce the trade deficit.
In conclusion, the RBI’s intervention in the forex market has been significant, with the central bank spending ₹2.7 lakh crore to prevent a sharp decline in the value of the rupee. However, despite this effort, the rupee has continued to fall to record lows, highlighting the need for more decisive action to address the underlying issues. The government and the RBI need to work together to implement policies that will reduce the trade deficit, attract more foreign investment, and promote economic growth.
The current situation is a wake-up call for policymakers, who need to take a more holistic approach to managing the economy. This includes implementing structural reforms to improve the business environment, investing in infrastructure, and promoting exports. Only by taking such measures can India hope to reduce its dependence on foreign capital and promote sustainable economic growth.
As the rupee continues to fluctuate, it is essential for businesses and individuals to remain vigilant and adapt to the changing circumstances. This includes hedging against currency risks, diversifying investments, and seeking opportunities in the export market. By being proactive and responsive to the challenges posed by the falling rupee, India can minimize the negative impacts and maximize the benefits of a more competitive exchange rate.
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