The Reserve Bank of India (RBI) has been a net buyer of US dollars in the spot market for the past decade, except for fiscal years 2018-19 and 2022-23, when it became a net seller.
As of October, the central bank had net purchased $1.7 trillion in the current fiscal year. India’s foreign exchange reserves were the fourth largest among major reserve countries, having increased by $28.4 billion during 2023-24. The Reserve Bank of India (RBI) has severely disputed the International Monetary Fund’s (IMF) report that reclassified India’s currency rate regime from floating to stabilized. The central bank has repeatedly said that its interventions in the foreign exchange market are simply intended to reduce volatility rather than manipulate the exchange rate.
The IMF categorized India’s currency rate system, moving it from a “floating” to a “stabilized arrangement” for the period between December 2022 and October 2023. This shift can be attributed to alleged RBI involvement in the foreign exchange market since the rupee has demonstrated a particularly narrow range against the US dollar.
In the current calendar year, the rupee has shown exceptional stability against the US dollar, with the least volatility seen in over two decades. The local currency fell 0.5% against the US dollar. The rupee has depreciated by 1.2% in the current fiscal year.