The Indian rupee may require timely Reserve Bank Of India (RBI) support as global uncertainties intensify, as per a recent SBI Research note. “Unprecedented times call for unequivocal, unprecedented and unambiguous supports,” the report said, noting that while parallels with 2013 are being drawn, the current situation is structurally different and does not warrant a repeat of past measures.
Unlike 2013, when currency volatility and fiscal concerns forced the RBI to roll out FCNR(B) (Foreign Currency Non-Resident Bank) deposits, the current macro environment remains stable, with domestic-led growth and relatively strong fundamentals, even as the rupee weakens.
SBI Research cautioned against using overseas debt-led tools such as NRI deposit schemes in the current cycle. It noted that differences in global interest rates and high hedging costs could make such options less effective and more expensive.Instead, the report highlighted India’s strong external position. Forex reserves are above $700 billion, covering more than 10 months of imports, while short-term external debt remains below 20% of reserves. “There is no reason to suggest that we should use FX reserves for rainy days only,” the note said, suggesting that measured intervention could help stabilise the currency.The report also pointed out that the rupee’s movement does not fully align with the idea of it acting as a shock absorber. It depreciated 6.4% between April 2025 and February 2026 even as the dollar index declined, indicating relative underperformance. Since the global shock at the end of February, however, the rupee has moved broadly in line with other currencies.To address current pressures, SBI Research suggested a few targeted steps.Also read: Why the rupee’s fall may slow but volatility could riseIt recommended creating a separate forex window for oil marketing companies (OMCs), which account for $250–300 million of daily dollar demand. This could help separate structural demand from market-driven flows and improve visibility on currency movements.The report also flagged that recent changes in banks’ open position limits may have led to a divergence between onshore and offshore markets. As banks adjust their positions, this could create liquidity pressures, which are already visible in rising non-deliverable forward (NDF) premia.To ease this, the report suggested applying the $100 million limit only to banks’ trading books rather than their entire balance sheets, especially at a time when foreign investors may be withdrawing funds and placing additional demand on the system.Finally, SBI Research noted that currency and bond markets are increasingly linked. It suggested that the RBI could consider tools like Operation Twist, along with liquidity measures, to support the rupee.Overall, SBI Research said India’s fundamentals remain strong and the situation is not comparable to 2013, but added that timely and calibrated policy action will be key to managing volatility.
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