RBI Fires Before the Bell: India’s Central Bank Returns to Pre-Market Rupee Defence

Key Insights 

• The Indian rupee has seen a sharp advance before the start of the local spot market, buoyed by the probable dollar-selling action by the Reserve Bank of India, reported three traders.
   
• RBI’s daily action, valued at about $1 billion according to four bankers, is slowing down, though not stopping, the rupee decline driven by elevated oil prices and rising US Treasury yields. 

RBI’s Pre-Market Intervention: Back to Rupee Defense

The RBI is once again stepping in to defend its currency. The RBI is resuming defense ahead of market hours, which has caused the rupee to gain as much as 0.6% to 96.2450 per dollar. 

India’s rupee advanced the most in Asia on Thursday following intervention from the RBI, according to Bloomberg. The RBI sold dollars in the offshore market. 

The move is quite decisive and has clearly shown the willingness of the central bank to defend the rupee from losing momentum and touching the 97 level. 

There is still trouble brewing behind the scenes. The rupee’s decline is continuing after touching a string of record lows, and have touched the critical level of 97 per dollar for the very first time in the last nine days despite the efforts of the RBI, which has only moderated the speed of its loss. 

Sources claim that India’s finance ministry raised the CPI forecast for FY27 from 5.5% to 6%. As a result, financial markets are looking forward to seeing more aggressive actions from the monetary policy side to control the surge in inflation, which is already accompanied by currency weakness. 

Numbers Behind the Situation

The scale of RBI’s defensive actions can be easily seen in the following table.

According to Gaura Sen Gupta, chief economist at IDFC FIRST Bank, the RBI has sold around $5 billion of dollars during the first week of May. 

This is not only a massive sum of money, but also clearly demonstrates how hard it is becoming for India’s central bank to defend the domestic currency.

Why Each Household in India Cares About the Rupee?

The falling rupee not only hurts traders, but each person in the country directly through their pockets. 

According to the April 2026 report of the wholesale price index, fuel prices have increased by 24.71%. Thus, gasoline prices have grown by 32.4% year-on-year, while diesel has grown by 25.19%. 

India imports almost 90% of its crude oil, meaning that any fall of the rupee leads to the rise of its cost to import crude oil. 

Consequently, prices in the domestic market increase accordingly. For people who face rising prices in the food sector, this is an unwanted development.

However, it should be noted that despite the fact that most Asian currencies gained substantially against the dollar in 2025, the rupee lost more than all other currencies. Nevertheless, the rupee did not drop even further thanks to continuous dollar selling by the RBI. 

Experts Analysing the Situation

Financial experts offer their views on the matter. “For the RBI, the goal here is to slow the decline of the rupee and prevent its self-perpetuating spiral from developing,” said Gaura Sen Gupta, chief economist at IDFC FIRST Bank. 

It is quite important to note this difference in goals. The RBI does not intend to freeze the exchange rate, but it needs to stop the growing panic among investors. 

RBI governor Sanjay Malhotra stated that the central bank’s exchange rate policy remains unchanged and still aims for a market-determined currency. Meanwhile, according to rumors, the RBI might consider using more serious methods to defend the currency, like raising interest rates. 

Conclusion

It can be concluded that RBI’s decision to step in ahead of market hours is clearly demonstrating the seriousness of the situation. RBI will continue being an active player in the market as long as oil prices remain elevated and risk sentiment remains weak. 

FAQs 

What is the reason behind the sharp decline of the Indian rupee despite RBI’s intervention in terms of selling dollars?

The reason why the rupee is declining lies in the fact that the country relies heavily on imported crude oil, whose price on the international market rises and creates additional need for dollars. Although the RBI tries hard to stop the slide through dollar sales, higher yields on US Treasuries and low risk appetite worldwide put pressure on the rupee anyway.

Is there any chance that RBI will become more aggressive if the rupee approaches 97 per dollar?

Yes. Investors expect the RBI to become more aggressive in implementing its strategies in case of further rupee decline. Besides, apart from dollar sales, monetary policy tightening, including an interest rate hike, is also expected.