RBI net dollar purchases hit record $18.65 bn in July: Monthly bulletin

The Reserve Bank of India net purchased a record $18.65 billion in July, compared with a net purchase of $561 million in June, according to the central bank’s monthly bulletin.

The previous high was in June 2021, when the central bank had net bought $18.63 billion in the spot market. The surge came as the central bank’s concessional swap facility for FCNR(B) deposits, external commercial borrowings and overseas foreign currency borrowings, launched in early June, pulled in $40.82 billion of inflows by July-end. Banks routed these dollars back to the RBI through the swap window.

“The sharp rise in net purchase of dollar in July was largely driven by the dollars mobilised under the FCNR(B) and other concessional swap windows, which banks sold to the RBI,” said a dealer at a state-owned bank.

The rupee depreciated by 0.71 per cent in July. The central bank bought $38.42 billion, while it sold $19.77 billion during the month.

The RBI has been a net dollar seller in 10 of the past 16 months. It sold dollars consistently from August 2025 to December 2025, with net sales peaking at $11.88 billion in October 2025, before sales paused in January 2026 and February 2026 and resumed in March 2026.

The trend has reversed in FY27 so far. After net selling dollars in April and May, the RBI turned a net buyer in June and stepped up purchases sharply in July. The $18.65 billion net purchase in July took cumulative net dollar buying in FY27 so far to $4.17 billion, reversing the selling trend seen in FY26.

India’s foreign exchange reserves rose to $692.87 billion by July-end from $666.93 billion at the end of June, a monthly gain of nearly $26 billion. The reserves climbed steadily through the month, with the final week of July alone adding $10.51 billion, the sharpest weekly rise since January 30, on the back of higher foreign currency assets and gold holdings.

India’s foreign exchange reserves stood at $765.9 billion during the week ended September 18, the latest data released by the Reserve Bank of India showed.

The outstanding net short dollar position in the forward market surged to a record $136.77 billion by July-end from $103.33 billion at June-end.

Short positions with a tenure of less than one year rose to $47.66 billion by July-end, against $40.33 billion at June-end. Short positions with a tenure of more than one year rose to $91.54 billion from $64.21 billion during the same period.

Of the $136 billion net short dollar position, $15.59 billion was in one-month contracts, $7.32 billion in one-to-three-month tenures, $24.75 billion is set to mature between three months and a year, and the remaining $91.54 billion was in contracts with a tenure of more than a year. The central bank had a $2.43 billion long position in the one-month contract.

“They did not want these dollar positions to mature as that could have added to pressure on the rupee, particularly amid the ongoing geopolitical tensions. The RBI is aware that these are borrowed dollars and will eventually have to be repaid,” said the treasury head at a private bank.

Further, as of August, the real effective exchange rate (REER) of the Indian rupee stood at 88.92, against 88.69 in July.

The REER adjusts the nominal effective exchange rate (NEER) to account for inflation differentials between India and its major trading partners. A REER value above 100 indicates an appreciation of the rupee relative to the base year, potentially making Indian exports less competitive in global markets.