The Indian rupee came under renewed pressure on Monday, falling to a two-week low of ₹95.6025 against the US dollar, as higher crude-oil prices and the Reserve Bank of India’s decision to end a special foreign-exchange swap facility earlier than planned weighed on market sentiment.
RBI brings forward the swap-window closure
The immediate trigger for market concern was the RBI’s decision last Friday to close its concessional foreign-exchange swap facility for fresh FCNR(B) deposits on August 31, rather than September 30 as originally planned.
The facility was introduced in June to encourage Indian banks to attract foreign-currency deposits from non-resident Indians (NRIs). The RBI effectively absorbed the foreign-exchange hedging cost, making these deposits more attractive to banks and helping bring additional dollars into the Indian financial system.
The response was considerably stronger than expected. Banks had mobilised $52.3 billion through the FCNR(B) route by August 13, while total foreign-exchange inflows generated through the broader measures have approached $57 billion.
Forex reserves climb above $700 billion
The inflows have significantly strengthened India’s external position. India’s foreign-exchange reserves rose to around $707 billion as of August 7, with reserves increasing by more than $40 billion since the week ended July 3. The latest weekly increase of about $14.14 billion was the strongest since January 30.
This is one of the key reasons analysts believe the RBI felt comfortable ending the FCNR(B) window earlier than scheduled: the central bank appears to have attracted substantially more foreign currency than initially anticipated.
Why is the rupee still falling?
Despite the huge increase in reserves, the rupee remains vulnerable to several external pressures.
One of the biggest is crude oil. Brent crude rose roughly 1% to around $89.20 a barrel on Monday amid continuing geopolitical tensions in the Middle East. Higher oil prices are particularly important for India because the country is heavily dependent on imported crude. More expensive oil means Indian importers need more dollars, increasing demand for the US currency and putting downward pressure on the rupee.
The rupee also continues to face strong dollar demand from importers and other market participants.
RBI appears to be defending the rupee
Market traders believe the RBI has been actively intervening in the foreign-exchange market through state-run banks.
The rupee slipped to around ₹95.49 per dollar in early trading, but traders reported that dollar sales by state-owned banks—believed to have been carried out on behalf of the RBI—helped prevent a sharper fall.
Reuters also reported that the RBI’s repeated intervention has helped keep the rupee’s movements relatively contained despite significant global uncertainty. The currency’s realised volatility has fallen to around 2%, with analysts expecting it to remain broadly within the ₹94.50–₹96 range through September.
What does the early closure mean for Indian banks?
The RBI’s decision has also prompted Indian banks to accelerate their overseas fundraising plans.
According to Reuters, Indian banks are expected to raise at least $5 billion through overseas bonds and loans over the next couple of weeks. ICICI Bank and HDFC Bank are each targeting around $1.5 billion, while several other private and public-sector lenders are also preparing dollar fundraising programmes.
The early closure therefore does not mean that India is shutting down all channels for foreign-currency borrowing. Other measures, including facilities related to external commercial borrowings and overseas foreign-currency borrowings, remain available until the end of December 2026.
The bigger picture
The latest rupee movement highlights a complicated situation for India’s economy.
On one hand, foreign-exchange reserves above $700 billion and nearly $57 billion of policy-driven inflows provide a substantial cushion. On the other hand, higher oil prices, geopolitical uncertainty and persistent demand for dollars continue to put pressure on the currency.
The RBI now appears more focused on containing excessive volatility rather than defending a particular exchange-rate level. Analysts expect the rupee to remain range-bound in the near term, although further weakness cannot be ruled out if oil prices rise substantially or global geopolitical tensions worsen.
Bottom line: Monday’s fall to ₹95.6025 per dollar is a sign of continued pressure on the rupee, but India’s strengthened foreign-exchange reserves give the RBI considerably more room to manage volatility. The immediate focus for markets will be crude prices, geopolitical developments and how aggressively the central bank continues intervening in the currency market.
