The Reserve Bank of India has implemented comprehensive foreign exchange measures to shield the rupee from offshore market pressures, according to The Economic Times. A 4.5% fall in the Indian rupee since the breakout of the Iran war prompted the central bank to impose a cap on banks' net open FX positions in the onshore markets in late March. The RBI also barred lenders from offering non-deliverable forward contracts to clients and stopped firms from re-booking canceled FX contracts to curb speculation. As per latest reports, the central bank has now capped bank net open rupee positions at $100 million and banned rupee NDF offerings to clients - measures that delivered the sharpest one-day rupee gain in over a decade. These curbs effectively 'broke the direct link between the onshore market and the offshore market', preventing speculative activity from translating into onshore dollar demand.
The rupee has demonstrated remarkable resilience, gaining 2% last Thursday and trading at approximately ₹92.8-93.5 per USD as of early April 2026, according to The Economic Times. This represents the strongest recovery since 2013, with the currency rebounding from its all-time low near ₹95.2 in late March. The rupee's year-to-date depreciation remains modest compared to 2025's ~5% slide, indicating that the recent volatility stems from temporary external shocks rather than fundamental structural issues. As reported by The Economic Times, the RBI's swift intervention has restored stability quickly, with the central bank conducting direct dollar sales from reserves to curb volatility and demonstrating effective oversight of the currency market.
Despite recent currency volatility, India's economic fundamentals remain robust, with GDP projected at 7.4-7.5% for FY26 driven by domestic consumption and investment, according to The Economic Times. The country maintains healthy forex reserves at approximately $688 billion as of late March 2026, providing over 10-12 months of import cover - a solid buffer by global standards. India's real effective exchange rate (REER) remains competitive at around 95 index level, supporting exports without signaling overvaluation. The economy shows low and stable inflation below RBI target and strong domestic drivers including infrastructure push, digital economy growth, and consumption resilience. However, challenges persist with high import dependence, especially energy (80-85% of crude oil imports) and persistent current account deficits driven by imports consistently outpacing exports in goods.
According to Gambhir's analysis reported by The Economic Times, the FX market before the integration of offshore and onshore markets saw heavy influence by offshore pricing on the onshore market. The RBI first opened the NDF market to Indian banks in June 2020 and to resident Indians in June 2023 to deepen participation. Since opening the NDF market to local participants, the central bank has placed both informal and formal restrictions on accessibility. The current depreciation is driven by fundamental demand-supply imbalances for dollars, including high import dependence, persistent current account deficits, and capital flow dynamics where foreign portfolio investors recorded net outflows of ~$18 billion in equities during 2025.
As reported by The Economic Times, Gambhir acknowledges that if the RBI's measures don't deliver the desired outcomes, the central bank may turn to direct measures for shoring up dollar supply or curtailing some dollar demand. In the past, the central bank has used dedicated dollar-buying windows for oil companies and facilities to mobilize foreign currency deposits from non-resident Indians. For sustained currency strength, citizens can contribute through reducing non-essential imports, supporting domestic economy by buying Indian-made goods, and boosting savings and productivity. The government and RBI are also implementing broader policy support including Production-Linked Incentive schemes, infrastructure spending, and new trade agreements to reduce import dependence and enhance export competitiveness.
