Rupee's fall is ‘reckless’, RBI must step in more aggressively: SBI Research

SBI Research has urged the Reserve Bank of India (RBI) to take a stronger intervention to support the rupee, stating that the recent weakening of the currency appears disproportionate to India's economic fundamentals. In its latest report, SBI Research observed that the rupee's fall against the US dollar has been notably rapid despite the Indian economy continuing to display robust macroeconomic strength.

"The speed of rupee depreciation has been reckless, and the rupee took only 152 days to depreciate by Rs 5 per dollar (from Rs 90 to Rs 95)," the report said, underscoring that the rupee touched 96.83 against the US dollar on May 20. The report suggested that the current level of depreciation exceeds what would normally be justified by India's underlying economic conditions.

"The present Rupee depreciation is indeed higher when seen against India's macroeconomic fundamentals and clearly when compared with other currencies against the dollar strength," SBI Research said. It further noted that the country's foreign exchange reserves remain strong enough to help curb excessive volatility in the currency market. According to the report, India's reserves are adequately positioned to counter a one-sided decline in the rupee.

RBI past intervention

Although foreign exchange reserves have fallen by around USD 47 billion since February 27, 2026, they still stand at approximately USD 680 billion, providing the RBI with ample capacity to step in when necessary. SBI Research added that a stronger and more sustained intervention by the central bank could help steady the rupee during periods of global market uncertainty. It pointed out that past episodes of decisive RBI intervention have often been followed by a recovery in the currency's value.

The research team also discovered that the weakness of the rupee seems driven not only by global dollar strength but also by risk aversion connected to the ongoing conflict in West Asia and large foreign portfolio outflows from Indian equities.

It further noted that India has experienced net foreign institutional investor (FII) equity outflows of USD 22.7 billion since the West Asia conflict started. It also argued that the rupee is currently undervalued and has fallen beyond levels implied by broader trade-weighted measures. "The current Rupee value is not in synchronization with India's domestic macro fundamentals," the report said.