Mumbai | October 9, 2026
India’s foreign exchange reserves have declined by more than $50 billion in less than a month, falling from a record $785.71 billion on September 4 to $734.6 billion on October 2. The decline comes despite substantial foreign currency inflows through the Reserve Bank of India’s (RBI) special deposit scheme, highlighting continued pressure on the rupee.
RBI Interventions Drive Reserve Decline
The RBI has been selling dollars in the foreign exchange market and using currency swaps to manage the rupee’s depreciation and limit excessive volatility. These interventions can reduce reported reserves even when the central bank is actively supporting the domestic currency.
Record FCNR(B) Inflows Fail to Reverse Rupee Weakness
The RBI introduced a special swap window to encourage banks to mobilise Foreign Currency Non-Resident (Bank), or FCNR(B), deposits. According to Business Today, banks raised a record $132.98 billion through these deposits.
Despite the inflows, the rupee remained under pressure, trading near ₹96.77 per US dollar on October 7. Strong dollar demand and persistent global uncertainty have offset the benefits of additional foreign currency liquidity.
High Oil Prices and Foreign Investor Outflows
Elevated crude oil prices have increased India’s import bill and demand for dollars. Foreign portfolio investor selling has added to the pressure, while rising US Treasury yields have made overseas investments more attractive to global investors.
Business Today reported that foreign portfolio investors sold ₹35,861 crore worth of Indian equities in September and a further ₹25,126 crore through October 7.
RBI Says Rupee May Be Undervalued
RBI Governor Sanjay Malhotra said the rupee may be undervalued based on measures including the real effective exchange rate. He also stressed the importance of ensuring orderly movements in the currency market.
Analysts say a sustained recovery will depend partly on easing geopolitical tensions, lower oil prices and a reversal in foreign investor outflows. Central bank intervention can reduce volatility, but it cannot fully control these external factors.
