India’s RBI battles rupee pressure and falling foreign-exchange reserves

16 Oct 2026

India’s Reserve Bank is balancing support for a weakening rupee against the cost of drawing down foreign-exchange reserves. The pressure reflects strong dollar demand from oil imports, external capital outflows and market speculation, while valuation changes also affect reserve totals. The RBI has used dollar sales, swaps, targeted liquidity for oil companies, tighter derivatives rules and faster repatriation of export earnings, alongside measures to attract overseas Indian deposits. Reserves remain a substantial external buffer with about 11 months of import cover, but their decline from a record peak raises questions about how long intervention can continue and whether special inflows will endure. The central challenge is containing volatility without defending a fixed exchange rate or constraining legitimate trade and capital flows.