RBI Urged to Intervene to Stabilize Excessively Depreciated Rupee

SBI Research has called for stronger intervention by the Reserve Bank of India (RBI) to support the rupee, arguing that the currency’s recent depreciation is excessive and not in line with India’s economic fundamentals.

RBI Intervention Urged to Stabilize Rupee

The Reserve Bank of India (RBI) has been urged to take stronger measures to support the rupee, which has depreciated sharply against the US dollar in recent times. SBI Research noted that the rupee took only 152 days to depreciate by ₹5 per dollar, from ₹90 to ₹95, and touched 96.83 against the US dollar on May 20.

The research team argued that the current depreciation is higher than what India’s underlying economic conditions would warrant, and that the rupee is currently undervalued and has weakened beyond levels implied by broader trade-weighted measures.

Key Drivers of Rupee Weakness

The report identified several key drivers of the rupee’s weakness, including global dollar strength, risk aversion linked to the ongoing conflict in West Asia, and large foreign portfolio outflows from Indian equities. India has witnessed net foreign institutional investor (FII) equity outflows of $22.7 billion since the outbreak of the West Asia conflict.

Market Impact and Details

India’s foreign exchange reserves have declined by about $47 billion since February 27, 2026, but still remain around $680 billion, providing the RBI with sufficient room to intervene when required.
The report noted that stronger and sustained intervention by the central bank could help stabilise the rupee during periods of heightened global uncertainty.
The RBI is expected to keep policy rates unchanged at the upcoming Monetary Policy Committee meeting, but should continue using its available tools to address excessive currency volatility and support orderly market conditions.

Key Takeaways

SBI Research has called for stronger intervention by the RBI to support the rupee, arguing that the currency’s recent depreciation is excessive and not in line with India’s economic fundamentals.
The rupee is currently undervalued and has weakened beyond levels implied by broader trade-weighted measures.
The RBI is expected to maintain status quo on interest rates amid rising inflation risks stemming from higher crude oil prices, fuel price hikes and continued geopolitical uncertainties.

FAQs

What is the current value of the rupee against the US dollar?

The rupee touched 96.83 against the US dollar on May 20, according to SBI Research.

What are the key drivers of the rupee’s weakness?

What is the current level of India’s foreign exchange reserves?

India’s foreign exchange reserves have declined by about $47 billion since February 27, 2026, but still remain around $680 billion, providing the RBI with sufficient room to intervene when required.

Conclusion

SBI Research has called for stronger intervention by the RBI to support the rupee, arguing that the currency’s recent depreciation is excessive and not in line with India’s economic fundamentals. The RBI is expected to maintain status quo on interest rates amid rising inflation risks, but should continue using its available tools to address excessive currency volatility and support orderly market conditions. Investors and policymakers should closely monitor the RBI’s actions and the impact on the rupee in the coming days.