NEW DELHI, India — The recent depreciation of the Indian rupee since late February is broadly in line with movements seen in other global currencies, according to a report by SBI Research, which suggests that concerns about the rupee being used excessively as a “shock absorber” may be overstated.
The report noted that between April 2, 2025, and February 27, 2026, the rupee weakened by 6.4 percent. During the same period, the U.S. dollar index also declined by about 6 percent, even as many other currencies appreciated against the dollar.
“This was a period when most currencies were strengthening versus the dollar, but not the rupee,” the report said, adding that the argument that the rupee has been deliberately allowed to absorb external shocks may have been exaggerated.
SBI Research also pointed to structural factors in currency markets, including the Reserve Bank of India’s efforts to rationalize open positions for banks. While helpful, these measures may have contributed to a widening gap between onshore and offshore currency markets.
According to the report, Indian banks — both public and private — tend to hold long positions in onshore markets and short positions offshore, while foreign banks typically follow the opposite strategy.
India’s strong foreign-exchange reserves, which exceed $700 billion, were highlighted as a key buffer against volatility. The report said these reserves cover more than 10 months of imports, while short-term external debt accounts for less than 20 percent of reserves, giving the central bank ample room to intervene if needed.
However, SBI Research cautioned that near-term risks remain, particularly from volatile capital flows and elevated oil prices. It recommended policy measures such as creating a dedicated dollar window for oil marketing companies to meet their daily demand of $250 million to $300 million.
“This should allow better visibility on genuine FX demand and supply dynamics and help assess the effectiveness of measures taken to curb unwarranted volatility,” the report said.
The rupee recently posted its strongest single-day gain in nearly 13 years, closing at 93.10 against the U.S. dollar on Thursday. The rally followed steps by the Reserve Bank of India to tighten regulations in both domestic and offshore currency markets, aimed at reducing speculative pressures. (Source: IANS)
