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Economists figure out Indian central bank's currency market intervention
India's RBI Llikely Used Dollar Deposit Surge
to Cut Record FX Forward Book, Economists Say
By Nimesh Vora
Reuters
Wednesday, July 22, 2026
MUMBAI -- The Reserve Bank of India has likely used part of the initial inflows from its foreign-currency deposit drive to unwind a portion of its massive foreign exchange forward book, economists said, helping the central bank reduce near-term obligations.
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The RBI's package of measures aimed at supporting the rupee attracted more than $20 billion as of July 17, with more than four-fifths coming from foreign currency non-resident deposits mobilized by banks.
Since these dollars are swapped with the RBI for rupees, they would typically be expected to boost India's foreign-exchange reserves. However, reserves rose only by about $3 billion between the introduction of the measures and July 10, the latest date for which reserve data is available.
The central bank likely used part of the inflows to offset its short-dollar positions in the forward market, especially in the near-term maturity buckets, according to economists at Citi, HDFC Bank, and IDFC First Bank.
The RBI's net short dollar forward book stood at a record $106.6 billion as of May 31, reflecting its heavy use of forwards to cushion the rupee from volatile oil prices and weak capital flows. Of this, nearly $29 billion was concentrated in near-tenor contracts maturing within three months. ...
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