SBI Research has called for stronger intervention by the Reserve Bank of India (RBI) 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 the rupee took only 152 days to depreciate by ₹5 per dollar (from ₹90 to ₹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 the rupee,” it said.
SBI Research noted that foreign exchange reserves have declined by about $47 billion since February 27, 2026, but still remain around $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 or large-scale intervention ideally helps the rupee to stabilise,” 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 $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.
Published on May 31, 2026
