The Reserve Bank of India’s recent defense of the rupee versus the dollar is weighing on the country’s foreign exchange reserves, leading some analysts to call for less intervention in the future.
Excluding gold, India’s foreign exchange reserves are now enough to cover 8.7 months of imports, the lowest in three years, according to data compiled by Bloomberg. The weakness in the rupee comes at a time when India is facing a rising import bill due to high crude oil prices, which is impacting both its economy and markets.
The more the RBI intervenes, the less its firepower will be, which could lead to more problems if the crisis in the Middle East continues, said Indranil Pan, chief economist at Yes Bank Ltd.
In recent weeks, the RBI has increased intervention in the currency market to save the rupee, which fell to a new record low of 92.48/dollar on Wednesday (18 March 2026).
India’s foreign exchange reserves fell to $563 billion in the week of March 6 from a peak of $591 billion in June. Total reserves, supported by higher gold prices, fell by the most since November 2024.
According to former RBI Deputy Governor Michael Patra, India needs a foreign exchange reserve buffer of at least $1 trillion for strong intervention capacity.
With a forward book of $67.8 billion at the end of January, the chances of the RBI supporting the rupee are slim considering the outstanding dollar sales.
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“Defending a particular level of the rupee could be very problematic if the fundamentals change,” said Dheeraj Nim, FX strategist at Australia and New Zealand Banking Group. “RBI may adjust the rupee a little further before reserve levels become a concern.”