The Reserve Bank of India reduced its net dollar sales to $6.1 billion in May 2026, down from $8.9 billion in April. Despite this lower intervention in the spot market, the central bank’s outstanding net forward liabilities increased to $106.7 billion, signaling ongoing efforts to manage rupee volatility amidst global financial shifts.
Detailed Coverage
The Reserve Bank of India (RBI) moderated its direct selling of dollars in the foreign exchange market during May 2026. While the central bank remained a net seller, net sales dropped to $6.1 billion, a decrease from the $8.9 billion recorded in April 2026. This approach represents a notable shift from the same period last year, when the RBI was a net purchaser of $1.8 billion in the forex market.
Rising Forward Liabilities
While spot market intervention slowed, the RBI’s forward market operations showed a different trend. Outstanding net forward sales reached $106.7 billion by the end of May 2026, up from $95.3 billion in April. This level of forward liabilities is significantly higher than the $65.2 billion recorded in May 2025. These forward contracts essentially act as a commitment to sell dollars at a future date, and their expansion indicates that the central bank is managing currency risks across different time horizons.
Increased Two-Way Intervention
Data from the central bank shows that while net sales were lower, gross activity increased significantly. Gross foreign exchange purchases in May hit $22.2 billion, compared to $16.2 billion in April and just $9.1 billion in May 2025. Simultaneously, gross sales rose to $28.3 billion from $25.2 billion in April. This increased volume in both buying and selling suggests that the RBI is actively participating in two-way trading to reduce sharp fluctuations in the rupee's value rather than simply leaning in one direction.
Pressure on the Rupee and Inflows
Cumulative net sales by the RBI since the start of the current fiscal year, which began in April 2026, now stand at $15 billion. This sustained selling activity highlights persistent pressure on the Indian rupee, which often faces volatility due to global economic factors and capital flows. Further, the central bank is contending with a slowdown in foreign inflows. Net inflows into Non-Resident Indian (NRI) accounts fell by 29.5% to $1.3 billion during April and May 2026, compared to $1.9 billion in the same period a year ago.
Investors may monitor these trends as they reflect the RBI's balancing act between managing currency stability and maintaining sufficient foreign exchange reserves. The key to watching the rupee’s trajectory will be observing the pace of future dollar outflows and whether NRI inflows or other foreign capital investments show signs of recovery in the coming months.