RBI Sells $7.6 Billion in August to Control Rupee Fall

The central bank tightens control as the rupee weakens and reserves fall again.

The Reserve Bank of India (RBI) increased its dollar sales in August 2025 to control the rupee’s fall against the US dollar. According to the RBI Monthly Bulletin (October 2025), the central bank sold $7.6 billion in the spot market as the rupee faced strong downward pressure.

Data from the RBI’s report showed that the Real Effective Exchange Rate (REER) dropped to 97.6, its lowest in months. The RBI reportedly acted early, selling dollars before the rupee neared ₹89 per dollar.

RBI’s Forex Market Activity in August 2025

The RBI’s Database on Indian Economy showed that dollar sales rose sharply in August compared to the earlier months.
 

From smaller sales in June and July, the RBI moved to stronger action in August. The sale of dollars reduced short-term panic in the currency market but made liquidity tighter.

Bankers said that short-term interest rates rose slightly as banks adjusted to the tighter money flow.

What REER Shows About the Rupee?

The Real Effective Exchange Rate (REER) is a measure used by the RBI to compare the rupee with currencies of trading partners after adjusting for inflation. When the REER falls below 100, it means the rupee is undervalued.

An undervalued rupee can make Indian exports more competitive but also increases the cost of imports like crude oil, electronics, and fertilisers.
 

The RBI measures to stabilise Indian currency are a tightrope act. Selling dollars strengthens the rupee for now, but drains reserves slowly. 

The governor’s tone showed caution too. “Growth outlook is softer and below expectations,”said RBI Governor Sanjay Malhotra during the policy briefing in October 2025.

Similar Interventions in the Past

The Reserve Bank of India has taken similar steps previously. In February 2025, it sold large amounts of dollars (more than US$10 billion) in one month to prevent a sharp fall in the rupee.

Past interventions often caused liquidity in the system to tighten and short-term borrowing costs to rise. A similar trend appeared again in August when call rates climbed.

This time, the central bank acted early, before the market became unstable. That early action helped prevent panic and reduced fluctuations in the currency market.

As LoansJagat reported in “RBI Likely to Restart FX Swaps to Boost Market Liquidity”, the RBI used swap operations and other tools to manage rupee pressure while keeping liquidity in check. 

Conclusion

The RBI’s foreign exchange operations in August 2025 show that the central bank acted early to defend the rupee. The sale of $7.6 billion helped control volatility and support market confidence.

However, every intervention has a cost. With reserves falling and growth slowing, the RBI must balance between protecting the rupee and preserving its reserve strength. The coming months will decide how effectively this balance is maintained as global market trends continue to change.
 

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