RBI Achieves Record High with $43 Billion in Net Dollar Purchases

MUMBAI: The Reserve Bank of India (RBI) reported a significant increase in its net dollar purchases, which surged 132% to $43.3 billion in August 2026. This rise was largely driven by inflows from its concessional FCNR(B) swap facility. Additionally, the central bank’s outstanding net forward short position exceeded $200 billion for the first time.

In August, the RBI purchased $74.5 billion in dollars, a 93.9% increase from $38.4 billion in July. Notably, there were no dollar purchases in August 2025, as the RBI focused on defending the rupee amid foreign portfolio outflows. Dollar sales also saw a substantial rise, increasing 57.9% month-on-month to $31.2 billion from $19.8 billion in July, and up 305.6% compared to the $7.7 billion sold in August 2025.

Gross transactions in both onshore and offshore over-the-counter markets surpassed $105.7 billion. The RBI’s dollar purchases were instrumental in absorbing the $127 billion mobilized by banks through FCNR(B) deposits from non-resident Indians (NRIs). However, the ongoing pressure on the rupee led the central bank to sell dollars to support the currency. The $31.2 billion in dollar sales during August accounted for about a quarter of the amount raised through FCNR(B) deposits.

India’s foreign exchange reserves decreased by $5.01 billion to $721.02 billion for the week ending October 16, down $64.7 billion from the record high of $785.71 billion reached on September 4. The decline was primarily due to a $5.76 billion drop in foreign currency assets, the largest component of reserves, although this was partially offset by a $706 million increase in gold reserves.

The RBI’s concessional dollar-rupee swap facility allowed banks to convert dollar deposits from NRIs into rupees for three to five years while securing forward hedges from the central bank. This deposit mobilization window closed at the end of August, requiring banks to return the dollar proceeds to the RBI. The central bank also increased its dollar sales and conducted offsetting sell-buy swaps to manage the rupee and the liquidity resulting from its purchases. As a result, the outstanding net forward short position rose by $63.3 billion, or 46.3%, in August, reaching a record $200.1 billion, compared to $136.8 billion in July and $53.4 billion a year earlier.

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