Mumbai: The Reserve Bank of India (RBI) recorded net dollar purchases of US$43.264 billion in August 2026, more than doubling its net purchases in July as the central bank managed substantial foreign-currency inflows through the foreign-exchange market.
According to the RBI’s monthly bulletin released on October 23, the central bank purchased US$74.472 billion and sold US$31.208 billion in the onshore and offshore over-the-counter foreign-exchange market during August. This resulted in net purchases of US$43.264 billion, compared with US$18.652 billion in July.
The increase was linked to inflows associated with the RBI’s special swap facility for Foreign Currency Non-Resident (Bank), or FCNR(B), deposits, along with foreign-currency borrowings. The central bank has been using foreign-exchange operations to manage currency flows and market volatility amid pressure on the Indian rupee.
The data also highlights the scale of the RBI’s forward-market positions, which increased significantly during August. Despite the substantial dollar purchases, the rupee continued to face challenges from a strong US dollar, elevated crude oil prices and uncertainty in global financial markets.
RBI dollar purchases more than double from July
The RBI’s net dollar purchases rose from US$18.652 billion in July to US$43.264 billion in August, an increase of approximately 132%.
The central bank’s gross purchases during August stood at US$74.472 billion, while its dollar sales amounted to US$31.208 billion. The difference between the two figures represents the net amount purchased.
The increase followed net purchases of US$561 million in June. In May, the RBI had recorded net dollar sales of US$6.104 billion, showing how its market operations shifted over the three-month period.
Dollar purchases and sales are part of the RBI’s management of foreign-exchange market conditions. The central bank may buy dollars when foreign-currency supply is strong and sell them when demand for dollars puts pressure on the rupee.
Such transactions can help manage excessive volatility, although they do not guarantee a particular exchange rate. Currency movements continue to depend on international capital flows, trade payments, crude oil prices, interest-rate expectations and broader global developments.
Special FCNR(B) swap facility drives inflows
The sharp increase in dollar purchases coincided with foreign-currency inflows linked to the RBI’s concessional swap facility for FCNR(B) deposits and certain overseas borrowings.
FCNR(B) deposits allow eligible non-resident Indians to hold foreign-currency deposits with authorised Indian banks. Under a swap arrangement, foreign currency can be exchanged for rupees for a specified period, with the terms of the transaction agreed in advance.
The RBI introduced a special facility to encourage foreign-currency inflows through participating banks. The arrangement helped banks mobilise overseas funds while providing a mechanism for managing the associated exchange-rate exposure.
The facility’s closure was brought forward to August 31, 2026, from the originally scheduled September 30 deadline after banks had mobilised substantial funds. The return of dollars associated with the arrangement contributed to the increased activity recorded in August.
The resulting transactions formed part of the central bank’s broader foreign-exchange operations. However, the gross and net purchase figures should not be interpreted as a direct measure of the change in India’s foreign-exchange reserves.
RBI’s cumulative dollar purchases rise in FY27
The August data marked a significant change from the RBI’s net dollar-selling position during the previous financial year.
During FY26, the central bank recorded net dollar sales of US$53.132 billion in the onshore and offshore over-the-counter segment. The direction of its operations shifted in FY27, with the RBI recording net sales in April and May before returning to net purchases in June.
Net purchases increased to US$18.652 billion in July and then climbed to US$43.264 billion in August.
Cumulative net dollar purchases from the end of March to the end of August reached US$47.430 billion, compared with US$4.170 billion at the end of July. The August figure therefore substantially offset the net dollar sales recorded during FY26.
These figures cover transactions in the specified market segment. The RBI also operates in currency futures and forward markets, so the spot-market numbers alone do not provide a complete picture of its overall foreign-exchange exposure.
Forward dollar position reaches record levels
The RBI’s outstanding net short dollar position in the forward market rose to US$200.055 billion at the end of August, compared with US$136.77 billion at the end of July.
A forward contract is an agreement to exchange currencies at a specified future date under agreed terms. A net short dollar position indicates that the central bank has a net commitment to sell dollars in the forward market, after accounting for offsetting positions.
The increase in this position reflects the scale of the RBI’s forward-market activity alongside its spot transactions. Forward contracts can be used to manage currency exposure and the timing of foreign-exchange flows.
The RBI’s gross short forward positions with maturities of less than one year rose to US$55.15 billion in August from US$47.66 billion in July. Positions with maturities exceeding one year increased to US$176.57 billion from US$91.54 billion.
At the same time, the central bank’s long dollar positions increased to US$31.66 billion from US$2.43 billion in July. These positions mature within one month. After adjusting for the long positions, the RBI’s net short position in contracts maturing within one year was approximately US$23.5 billion in August, down from US$45.2 billion in July.
The figures underline why the RBI’s spot-market purchases must be considered alongside its forward and swap transactions when assessing its foreign-exchange operations.
Rupee remains under pressure from global factors
The Indian rupee’s movements during the period reflected several competing forces. Foreign-currency inflows associated with the FCNR(B) facility supported the currency in early September, but those gains were subsequently reversed as crude oil prices increased.
The rupee also faced pressure from a stronger US dollar and changing global market conditions. Higher oil prices can increase India’s import bill because the country relies heavily on imported crude, raising demand for dollars among oil importers.
According to the RBI bulletin, the rupee had experienced a depreciating bias since late September. It appreciated in mid-October, supported by measures taken by the central bank to curb speculative dollar demand and a softer US dollar.
On October 23, the rupee settled 12 paise lower at ₹94.93 against the US dollar, according to the report. The currency’s performance remains sensitive to movements in crude oil prices, global interest rates and capital flows.
Outlook for the Indian rupee
The RBI has identified several factors that could influence the rupee in the coming period, including a strong US dollar, elevated import costs, volatile capital flows and uncertainty surrounding trade policies. Escalating geopolitical tensions or more aggressive monetary tightening by major central banks could add to the pressure.
At the same time, India’s services exports, stable bilateral trade arrangements and sustained foreign capital inflows could provide support to the currency.
The August figures demonstrate the scale of the RBI’s foreign-exchange interventions during a period of substantial dollar flows. However, net dollar purchases alone do not establish whether the rupee will strengthen or weaken in the future.
The currency’s direction will continue to depend on domestic economic conditions, international developments and the balance between demand for and supply of foreign currency. The RBI’s spot purchases, forward contracts and swap arrangements remain important elements of its approach to managing foreign-exchange market conditions.