13/08/2026
【Current News】 India's Currency Defense Just Quietly Beat a 13-Year-Old Record
Forty billion dollars sounds like a big number until you see what it's being measured against.
Since June, measures introduced by the Reserve Bank of India have drawn more than 40 billion US dollars in foreign-currency inflows, aimed at rebuilding foreign currency buffers as the rupee comes under pressure from elevated crude prices and broader emerging-market volatility. By the end of July, foreign currency non-resident bank deposits, known as FCNR(B), accounted for 36.7 billion dollars of that total, with the rest coming through overseas foreign currency borrowings and external commercial borrowings. RBI Governor Sanjay Malhotra confirmed on August 5 that FCNR(B) inflows alone are already exceeding the roughly 26 billion dollars mobilized through a similar window in 2013.
The mechanism behind these numbers is straightforward once you see it. Banks offering these dollar deposits used to bear the cost of hedging currency risk themselves, a cost that ate into the interest rates they could offer depositors. The RBI now absorbs that hedging cost directly, which is how some banks are offering rates as high as 7.75 percent on qualifying five-year USD FCNR(B) deposits, with banks now permitted to offer loans against eligible deposits. Malhotra ruled out closing this window early, calling the flows healthy and robust, though he noted the resulting liquidity surplus in the banking system will likely peak around September before getting absorbed by normal funding demand.
None of this means direct market intervention has disappeared, and it hasn't. Reuters reporting shows the RBI has continued selling dollars through state-run banks throughout August, keeping the rupee boxed in a tight range around 95.3 to 95.4 even as persistent hedging demand and elevated oil prices continue to press against it. Malhotra's own framing to press was that the rupee's recent softness reflects geopolitics and dollar strength rather than any weakening in India's underlying fundamentals.
Building a foreign-currency inflow channel this large doesn't replace the need to defend a currency day to day. It just means the central bank now has more than one tool doing that work at the same time.
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Indians living overseas deposited $36.72 billion in Indian banks, helping strengthen the country's foreign exchange reserves and support the rupee during recent market volatility.