RBI making selective intervention in spot market despite rupee hitting all-time low: Experts

Domestic factors foreign investors outflows from domestic equity market have also contributed to the depreciation of rupee

The Reserve Bank of India (RBI) has become conservative and selective in its interventions in the spot currency market despite the Rupee hitting an all-time low multiple times, experts said.

They added that the central bank has been increasingly using a multi-pronged approach and trying to manage volatility rather than any level.

"RBI may have become more selective or fine-tuned in its intervention strategy. Instead of heavy-handed, direct sales in the spot market, the RBI is increasingly using a multi-pronged approach and trying to manage volatility rather than any level," said Dilip Parmar, a senior research analyst at HDFC Securities.

Similarly, Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP, said RBI has become conservative in its intervention in the spot market as India needs a lower rupee to be able to effectively counter the aftereffects of the import duties that US has levied on Indian exports.

The selective intervention strategy is despite huge India's foreign exchange reserves and import cover.

Experts added that the RBI appears to be allowing for a more gradual and orderly depreciation of the rupee to incentivise the exports amid trade uncertainties.

Indian rupee has been under severe pressure amid external shocks from start of this financial year, has depreciated around 3.73 percent in FY26 so far.

Similarly, year-to-date the local currency depreciated 3.56 percent against the US dollar. The current depreciation of the local currency is the highest after two financial years.

The domestic currency first started depreciating due to US tariffs uncertainties, followed by other geopolitical situations such as a prolonged Russia–Ukraine war and rising tensions between Israel and Iran.

Domestic factors foreign investors outflows from domestic equity market have also contributed to the depreciation of rupee.

The imposition of 50 percent tariffs by US on Indian goods, which took effect on August 27, has dampened dollar inflows and negatively impacted domestic market sentiment, reducing export competitiveness and revenue. The tariffs are among the highest in the world, including a 25 percent penalty for buying crude oil from Russia.

Experts said that an increasing the foreign exchange reserves doesn’t mean RBI is buying the dollar, it reflects more of a revaluation of non-dollar assets and gold.

Currently, foreign exchange reserves of India stood at $702.966 billion as on September 12, 2025.