India’s central bank went from accumulating dollars to torching them at a remarkable pace. The Reserve Bank of India recorded net foreign exchange sales of $9.76 billion in March, a dramatic reversal from net purchases of $7.4 billion just one month earlier in February.
The reason is straightforward: the rupee fell approximately 4% during March, its steepest monthly decline since 2019. Soaring energy costs tied to the ongoing US-Iran conflict have been crushing the currency, and the RBI stepped in to keep the bleeding from becoming a hemorrhage.
The mechanics of a $30 billion month
The gross figures tell a more revealing story. The RBI purchased $19.88 billion while selling $29.64 billion across spot and related forex markets during March.
The RBI’s outstanding forward dollar sales surged to a record $103.06 billion by the end of March. Forward contracts are essentially promises to sell dollars at a future date, and that $103 billion figure represents the largest such commitment the Indian central bank has ever made.
