RBI Ramps Up Forward Market Presence To Record Levels In May To Defend Rupee

The scale of Reserve Bank of India’s (RBI) intervention in the currency market came into sharper focus on Tuesday, with RBI data showing the central bank's net short dollar position in the forward market reached a record $106.66 billion at the end of May, up from $95.30 billion a month earlier.

The rise reflects how aggressively the RBI stepped in during May to prevent the rupee from weakening further, particularly around 20 May when the currency touched its record low of 96.96 per dollar. Multiple interventions at that point kept the rupee from breaching the psychologically significant 97 mark.

How The Position Is Distributed

The $106.66 billion is spread across contracts of varying maturities. Short positions maturing in less than one year stood at $50.59 billion at the end of May, up from $44.58 billion in April. The longer end of the book, covering contracts with maturities beyond one year, rose by around $6 billion to $56.07 billion.

Breaking it down further, $19.82 billion sits in one-month contracts, $8.86 billion in one-to-three month tenures, and $21.90 billion is due to mature between three months and one year. The largest single bucket remains the over-one-year contracts at $56.07 billion.

Where Things Stand Now

The rupee has recovered considerably from its May lows. On 30 June 2026, it closed at 94.66 per dollar, slightly weaker than its previous close of 94.54, with a firmer dollar index and modest foreign investor outflows weighing on the currency. The broader recovery from 96.96 has been driven by capital inflows following coordinated measures by the RBI and the government to attract foreign money into India.

Market participants are now watching how the RBI manages the expected inflows from its ECB and FCNR(B) schemes, which are estimated to bring in between $40 billion and $70 billion. There is broad agreement in the market on two likely uses for these inflows: unwinding the record short forward position book and rebuilding foreign exchange reserves, which currently stand at $672 billion, well below their late-February peak of $728 billion.

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The size of the net short position, while a record, is also a sign of how much firepower the RBI has deployed to keep the rupee stable, and managing its unwind in an orderly manner will be a key task for the central bank in the months ahead.