RBI depletes roughly half of its $140 bn FX war chest to support rupee

The Reserve Bank of India’s foreign-exchange war chest, assembled earlier this year at over $140 bn, is now about half depleted, with estimates that $75-80 bn has been spent on spot dollar sales and dollar-rupee swap operations since the June 8 launch of special measures. The central bank’s actions respond to a weakening rupee pressured by elevated oil prices, a surge in US Treasury yields and persistent foreign equity outflows, which threaten inflation and financial stability.

Economists derived the figures by adjusting weekly reserve data to remove revaluation effects, and they highlight a notable drop in usable reserves after accounting for forward shorts and gold holdings. At the end of September, the RBI’s net forward dollar liabilities were around $200 bn, while gold holdings stood at $106.4 bn. Recent steps also include a dedicated window for oil companies to purchase dollars directly from the RBI and higher cash-margin requirements on certain forward dollar contracts to deter importers from hedging. The central bank did not respond to requests for comment.