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- RBI rupee defence comes at a cost as liquidity dries up , yields rise
- RBI broadens Rupee defence beyond dollar sales , turns to tighter monetary conditions : Report
According to a source cited by Reuters, the RBI is in calibrated tightening mode across the board and will keep assessing further steps, including liquidity measures. It could discuss a 50-basis-point rate hike at its December review if inflation warrants front-loading, a possibility HSBC and State Bank of India have also flagged. Since March, the RBI has mobilised about $150 billion through inflow-attracting measures, while continued dollar sales have drawn down reserves and the cost of betting against the rupee has hit a five-year high. Domestic bond yields have risen 45 to 60 basis points since early September, and overseas investors have sold nearly $33 billion of Indian equities this year. Analysts warn that rapid tightening could slow growth, as nearly 60% of loans are linked to external benchmarks such as the policy rate and would reprice quickly.
- India Forex Reserves Fall $8 . 6 Billion To $726 Billion As RBI Defends Rupee
India's forex reserves fell $8.6 billion to $726 billion in the week ended October 9, marking their fifth straight weekly decline as the Reserve Bank of India (RBI) intervened to stabilise the rupee. The cumulative fall over five weeks is about $59.7 billion, after reserves hit a record $785.71 billion on September 4. The drop reflects high crude oil prices, foreign portfolio outflows and persistent dollar demand. The rupee closed at 94.96 per dollar on Friday, up 1.9% for the week, after nearly hitting a record low of 96.96 earlier in October. The RBI has rolled out measures including a dedicated dollar window for state oil marketers, tighter forex derivatives rules and a risk reserve requirement, though these cannot eliminate underlying dollar demand.
- Andy Mukherjee : Rupee defence It shouldnt be left to unconventional measures while regular policy tools gather dust
India's central bank has revived its 2013 playbook to defend the 100-rupees-to-the-dollar level, first pressing banks to raise $133 billion from the diaspora in under three months, then raising lenders' hedging costs and ordering oil importers to buy dollars directly from the RBI; the rupee has since strengthened to around 95 to the dollar. The columnist warns these fixes may be short-lived given Brent above $100 a barrel, inflation at a two-year high and surging US bond yields, and notes that reserves have fallen by $50 billion since early September against a negative dollar forward book of $200 billion. He argues the real fix is credibility: the RBI has been too accommodating to fiscal needs and slow on inflation, having cut borrowing costs by 125 basis points under Governor Sanjay Malhotra before a first 25 basis-point hike this month. Rather than a sharp 2013-style rate hike or more administrative controls, he suggests selling bonds to lift the whole yield curve and restore India's yield advantage over US Treasuries, whose 10-year spread has narrowed to about 200 basis points from 600 in 2013.
- Rupee relief comes with disruptions in financial markets
- Industry backs RBI , govt measures to support rupee , attract long - term capital
The industry body ASSOCHAM on Monday backed recent measures by the Reserve Bank of India (RBI) and the Finance Ministry to support the rupee and attract durable foreign capital. Its President, Nirmal K. Minda, aligned with former RBI Governor D. Subbarao's view that the rupee's long-term strength depends on sustained capital flows backed by strong fundamentals. The chamber said these steps helped the rupee recover from recent lows and cited the successful close of the $133 billion FCNR(B) mobilisation window on August 31. Chief Economist S.P. Sharma pointed to healthy forex reserves and the RBI's projected 7.1 per cent GDP growth for FY27. ASSOCHAM also welcomed the tax exemption for FPI investments in government securities from April 1, 2026, and the consideration of investor feedback on LTCG and STT for the 2027-28 Budget, while calling for tax rationalisation and incentives for longer-term equity investment.
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