RBI Sold Net $6.1 Billion In May To Defend Rupee As Oil Prices Pushed The Currency To Record Low

The Reserve Bank of India (RBI) was a net seller of $6.1 billion in the foreign exchange market in May, data released in the RBI's July bulletin confirmed. The central bank purchased $22.2 billion and sold $28.3 billion during the month, reflecting sustained intervention to manage the rupee's decline.

In April, net sales had been higher at $8.9 billion. The rupee hit a record low of 96.96 per dollar in May, battered by surging crude oil prices following the Iran conflict and elevated global bond yields.

Intervention And Policy Response

The RBI stepped in across multiple trading sessions during May to stabilise the currency. Alongside direct market intervention, a set of policy measures was introduced to attract dollar inflows, including tax reductions on foreign investments in Indian debt and incentives for overseas foreign currency deposit mobilisation. These efforts helped arrest the rupee's slide over subsequent weeks.

The RBI's net outstanding forward dollar sales rose to a record $106.66 billion at the end of May from $95.30 billion at end-April, pointing to the significant scale of the central bank's forward market commitments in defending the currency. The rupee closed at 96.5650 per dollar on Wednesday, down 0.3% on the day and at its weakest in two months.

Signs Of Improvement In Flows

Despite the pressures visible in May, the RBI's bulletin pointed to a more encouraging picture in subsequent months. Foreign inflows into bond markets picked up in June and have remained positive through July. Equity markets have also seen foreign inflows this month. The RBI described the recovery in foreign investment flows as showing a "revival of confidence in the economy".

Foreign exchange reserves remain comfortable, providing import cover of more than 10 months and covering around 88.5% of external debt outstanding as of end-March 2026.

Broader Economic Picture

The RBI said India's domestic economy had navigated external uncertainties well, supported by healthy demand and resilient industrial and services activity. Merchandise exports rose 16% year-on-year to $129.32 billion in April-June FY27, while imports grew 18% to $270.15 billion, widening the trade deficit to $37.42 billion from $20.85 billion a year earlier.

The uneven progress of the southwest monsoon was flagged as a potential risk to food prices, though the bulletin noted that comfortable public foodgrain stocks should cushion any inflationary pressure from that front.

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