Rupee at All-Time Low: RBI Pulls Out Emergency Playbook Not Used Since 2013

The Reserve Bank of India is studying measures to attract dollar inflows and strengthen its foreign exchange reserves as the rupee comes under mounting pressure from surging oil prices tied to the ongoing West Asia conflict.

The rupee has slumped 5.5% this year, hitting an all-time low of 95.33 per dollar on April 30. The currency opened 4 paise weaker at 94.95 against the dollar on Monday, May 4, continuing to hover near those record lows.

Foreign exchange reserves, which peaked at $728.5 billion, have since declined due to significant RBI intervention in spot and forward markets. Equity outflows have added to the strain, with foreign investors pulling out $19 billion in March and April alone, taking cumulative 2026 withdrawals to around $20.6 billion, exceeding the total outflows for all of 2025.

Two Options on the Table

Among the measures under consideration is reviving an NRI dollar deposit scheme last used in 2013, when it helped stabilise the rupee and brought in around $26 billion at a time when US interest rates were near zero, according to a Reuters report. Under that mechanism, the RBI had allowed banks to swap dollars raised through such deposits at concessional rates.

The second option reportedly being discussed is scrapping a 5% withholding tax on overseas investors in Indian government bonds, a move that could incentivise fresh inflows. Foreign investors were net buyers of Indian government bonds in 2025, investing around $6.5 billion, but that momentum has slowed sharply in 2026, with inflows of only about $1.1 billion so far, as sentiment soured following the outbreak of the Iran conflict.

Notably, no final decision has been taken on either measure, and any move would be made in consultation with the government. The final call on the withholding tax rests with the finance ministry, the report further said.

RBI's Existing Defences

The central bank has already taken several steps to support the rupee.

It has clamped down on arbitrage trades by banks, capped their net open onshore positions at $100 million, and banned banks from offering non-deliverable derivatives to residents and non-residents to limit speculative bets against the currency.

The RBI has also nudged oil companies to reduce spot dollar purchases to curb artificial demand, and has conducted dollar-rupee buy-sell swaps to inject liquidity while supporting the exchange rate. Despite the pressure, the RBI has maintained that its reserves remain comfortable, sufficient to cover 11 months of imports.