SBI Research calls for stronger RBI intervention as rupee slide outpaces fundamentals
New Delhi, May 31
SBI Research has called for stronger intervention by the Reserve Bank of India to support the rupee, arguing that the currency's recent depreciation is excessive and not in line with India's economic fundamentals.
In its report, SBI Research said the speed of the rupee's decline against the US dollar has been unusually sharp, even as the Indian economy continues to exhibit strong macroeconomic indicators.
"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 report said, noting that the rupee touched 96.83 against the US dollar on May 20.
According to the report, the current depreciation is higher than what India's underlying economic conditions would warrant.
"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.
The report argued that India's foreign exchange reserves remain adequate to counter excessive volatility in the currency market.
"India's FX reserves are optimally sufficient to combat the unidirectional slide of rupee," it said.
SBI Research noted that foreign exchange reserves have declined by about USD 47 billion since February 27, 2026, but still remain around USD 680 billion, providing the RBI with sufficient room to intervene when required.
The report said stronger and sustained intervention by the central bank could help stabilise the rupee during periods of heightened global uncertainty.
"We believe RBI's wholehearted/ large-scale intervention ideally helps Rupee to stabilize," it said, citing instances where stronger intervention was followed by appreciation in the currency.
The research team also observed that the rupee's weakness appears to be driven not only by global dollar strength but also by risk aversion linked to the ongoing conflict in West Asia and large foreign portfolio outflows from Indian equities.
India has witnessed net foreign institutional investor (FII) equity outflows of USD 22.7 billion since the outbreak of the West Asia conflict, according to the report.
SBI Research further argued that the rupee is currently undervalued and has weakened 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.
The report maintained that while the RBI is expected to keep policy rates unchanged at the upcoming Monetary Policy Committee meeting, the central bank should continue using its available tools to address excessive currency volatility and support orderly market conditions.
SBI Research expects the RBI to maintain status quo on interest rates amid rising inflation risks stemming from higher crude oil prices, fuel price hikes and continued geopolitical uncertainties.
— ANI
Reader Comments
SBI Research makes sense, but let's not forget that RBI has already depleted $47 billion from reserves since February. If we keep burning reserves, we might end up like other emerging markets that ran out of firepower. Maybe the real issue is the massive FII outflows—$22.7 billion is huge! The West Asia conflict is making everyone nervous. We need a balanced approach, not just intervention.
Interesting analysis from SBI. The rupee does seem disconnected from India's strong fundamentals—6%+ GDP growth, stable inflation control, and massive forex reserves. But markets are forward-looking, and global uncertainty is real. The RBI should intervene systematically rather than creating panic by being too passive. The speed of depreciation from 90 to 95 is indeed concerning. 🇮🇳
Yaar, this is a classic case of fundamentals vs sentiment. Our macros are solid—inflation under control, fiscal deficit manageable, CAD within limits. But global factors like strong dollar, West Asia tensions, and FII selling are creating a perfect storm. RBI should definitely step in more forcefully. I work in exports, and while weak rupee helps exporters, volatility kills planning. Stabilize the rupee first, then let market forces work. 😤💪
I trust the RBI's judgment more than SBI's research arm. The central bank has navigated multiple global crises remarkably well. Maybe they're letting the rupee find its natural level while conserving reserves for genuine emergencies. That said, the speed of depreciation does seem excessive. Let's hope the MPC cuts rates to stimulate growth while RBI uses OMOs to stabilize the currency.
R We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.