Reserve Bank of India Governor Sanjay Malhotra expects at least $80 billion [1] in foreign-currency inflows from recent measures to support the rupee.
These inflows are critical for the central bank to stabilize the national currency, which has faced depreciation pressures. By attracting U.S. dollars into the country, the RBI aims to manage volatility and maintain economic stability.
Malhotra said the projections in an interview published Thursday, Aug. 20. The measures are designed to pull in capital through various channels to bolster the rupee's position in the foreign-exchange market [1].
Other data indicates varying levels of success in these efforts. FCNR-B deposits mobilized $52.3 billion [2] as of Aug. 13. When combined with overseas foreign-currency debt, and external commercial borrowings, total inflows reached $56 billion [2].
Different reporting suggests a wider range of figures regarding the current progress. Some reports indicate that Indian banks have raised $32 billion [3] under these dollar-inflow schemes to date.
These efforts follow a period of active market intervention by the central bank. In May, the RBI sold a net $6.1 billion [4] in the foreign-exchange market to defend the rupee against pressures caused by rising oil prices.
Malhotra said the bank's net short dollar position remains very manageable [1]. The central bank continues to monitor the balance of inflows against the need for market intervention to prevent sharp currency swings.
“RBI Governor Sanjay Malhotra expects at least $80 billion in foreign-currency inflows.”
The disparity between the Governor's $80 billion estimate and the reported $32 billion to $56 billion already raised suggests the RBI is counting on significant future inflows to meet its targets. If these inflows do not materialize, the central bank may need to increase its sale of foreign exchange reserves, similar to the $6.1 billion intervention seen in May, to prevent the rupee from sliding further.
