SBI Research urges stronger RBI intervention as rupee slides

SBI Research is calling for more robust intervention from the Reserve Bank of India (RBI) to stabilize the rupee, asserting that the currency's recent slide is outpacing its underlying economic fundamentals.

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The speed of rupee depreciation has been reckless, and rupee took only 152 days to depreciate by Rs 5 per dollar (from Rs 90 to Rs 95).

The research report highlights the unusually rapid depreciation of the rupee against the US dollar, noting it took only 152 days for the rupee to fall by Rs 5, reaching 96.83 against the dollar on May 20. SBI Research contends that this depreciation is steeper than warranted by India's macroeconomic conditions and other currencies' performance against the dollar.

Despite a decrease of approximately USD 47 billion in foreign exchange reserves since February 27, 2026, SBI Research maintains that India's reserves, still around USD 680 billion, are sufficient for the RBI to intervene effectively against excessive currency volatility. The report suggests that stronger, sustained intervention by the central bank can help stabilize the rupee during periods of global uncertainty.

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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 also points to global dollar strength, risk aversion linked to the West Asia conflict, and significant foreign portfolio outflows from Indian equities as drivers of the rupee's weakness. The report notes that India has experienced net foreign institutional investor equity outflows of USD 22.7 billion since the West Asia conflict began.

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India's FX reserves are optimally sufficient to combat the unidirectional slide of rupee.

The research firm concludes that the rupee is currently undervalued and has weakened beyond levels suggested by trade-weighted measures. While acknowledging that the RBI is likely to maintain current policy rates due to inflation risks, SBI Research emphasizes the need for continued use of intervention tools to manage currency volatility and ensure orderly market conditions.

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We believe RBI's wholehearted/ large-scale intervention ideally helps Rupee to stabilize.