SBI Research Report Urges RBI To Use Forex Reserves To Stabilise Rupee Amid Volatility

ENA Economy 2026-03-31 14:40:23 New Delhi, Mar 31 (KNN) A SBI Research report has suggested that the Reserve Bank of India (RBI) may consider utilising foreign exchange reserves to stabilise the rupee amid heightened volatility triggered by the ongoing West Asia crisis. The recommendation comes after the rupee breached the 95 per US dollar mark during intra-day trade on Monday before settling at 94.78 (provisional), reflecting increased pressure due to global risk aversion and geopolitical tensions. Adequate Reserves Provide Cushion According to SBI research report, Indias foreign exchange reserves, estimated at over USD 700 billion, remain adequate, covering more than 10 months of imports. The report noted that such reserve levels are significantly comfortable and can be deployed to deter speculative movements in the currency market through calibrated intervention. It added that reserves should not be used only during extreme crises, indicating there is scope for timely intervention to manage volatility. Proposal for Special Window for Oil Firms The SBI report also recommended creating a separate foreign exchange window for oil marketing companies (OMCs), which typically account for a daily demand of around USD 250 300 million and an annualised demand of USD 75 80 billion. Such a mechanism would help segregate large, routine dollar demand from broader market activity, improving transparency in assessing supply-demand dynamics and the effectiveness of regulatory interventions. Concerns Over Market Divergence The report highlighted that recent regulatory measures, including RBIs efforts to rationalise open currency positions, may have contributed to divergence between onshore and offshore markets. It noted that Indian banks are generally long in onshore markets and short offshore, while foreign banks show the opposite trend. As banks unwind positions, liquidity pressures could intensify, potentially pushing offshore premiums higher. Data indicated a sharp rise in non-deliverable forward (NDF) premia, with one-year premia increasing to 4.19 percent from 3.43 percent, and one-month premia rising to 0.67 percent from 0.33 percent. Operational Concerns on NOP Cap The SBI Research report flagged operational challenges arising from the RBIs recent directive capping Net Open Position (NOP-INR) for banks at USD 100 million, effective April 10, 2026. The report suggested that the limit should apply only to banks trading books rather than their overall balance sheets to avoid disruptions. Outlook The report cautioned that continued capital outflows by foreign portfolio investors (FPIs) and some foreign direct investment (FDI) players could further pressure the rupee, underscoring the need for proactive measures to maintain currency stability. Overall, SBI Research emphasised that timely intervention, along with targeted regulatory adjustments, could help mitigate volatility and ensure orderly functioning of the foreign exchange market. (KNN Bureau) 45635 https://knnindia.co.in/news/newsdetails/economy/sbi-research-report-urges-rbi-to-use-forex-reserves-to-stabilise-rupee-amid-volatility 2026-03-31 14:40:23 knnindia.co.in SBI Research Report Urges RBI To Use Forex Reserves To Stabilise Rupee Amid Volatility