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 ride over the past few months, with its value plummeting to record lows against the US dollar. In an effort to mitigate the decline, the Reserve Bank of India (RBI) has been actively intervening in the foreign exchange market. According to a report by SBI Research, the RBI spent a staggering ₹2.7 lakh crore ($30 billion) to help soften the fall of the Indian rupee. Despite this massive intervention, the rupee continued to tumble, leaving many to wonder about the effectiveness of the central bank’s strategy.
The SBI Research report revealed that the RBI has intervened around $18 billion in the forex market during the period of June-September. Furthermore, the report estimated that the central bank has spent an additional $10 billion in October 2025, taking the total intervention to $30 billion. This significant expenditure is a testament to the RBI’s efforts to stabilize the currency and prevent a free fall. However, the fact that the rupee still managed to reach record lows raises questions about the impact of the RBI’s intervention.
The Indian rupee 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 ongoing global economic uncertainty, coupled with the COVID-19 pandemic, has also contributed to the rupee’s decline. The RBI’s intervention was aimed at reducing the volatility in the currency market and preventing a sharp depreciation of the rupee. However, the report suggests that the central bank’s efforts have had limited success in achieving this objective.
The RBI’s intervention in the forex market involves buying and selling US dollars to influence the exchange rate. When the RBI buys US dollars, it injects rupees into the market, which can help reduce the demand for the dollar and prevent a sharp appreciation of the US currency. Conversely, when the RBI sells US dollars, it absorbs rupees from the market, which can help reduce the supply of the dollar and prevent a sharp depreciation of the rupee. The central bank’s intervention can also help maintain liquidity in the forex market and prevent a crisis of confidence in the currency.
Despite the RBI’s best efforts, the rupee has continued to decline, reaching record lows against the US dollar. This has significant implications for the Indian economy, including higher import costs, increased inflation, and reduced competitiveness for Indian exporters. The decline of the rupee also makes it more expensive for Indian companies to service their foreign debt, which can lead to a increase in defaults and bankruptcies.
The SBI Research report highlights the challenges faced by the RBI in stabilizing the currency. The report notes that the RBI’s intervention has been significant, but it may not be enough to completely offset the downward pressure on the rupee. The report suggests that the RBI may need to consider other measures, such as increasing interest rates or imposing capital controls, to support the currency.
In conclusion, the RBI’s intervention in the forex market has been significant, with the central bank spending ₹2.7 lakh crore to prevent the rupee from falling. However, despite this effort, the rupee has continued to decline, reaching record lows against the US dollar. The RBI’s challenge is to find a balance between supporting the currency and maintaining economic growth. The central bank will need to carefully consider its options and develop a comprehensive strategy to stabilize the currency and support the Indian economy.
News Source: https://www.cnbctv18.com/market/currency/india-rupee-how-many-us-dollars-did-rbi-buy-ws-l-19794895.htm/amp
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