Indian Rupee Rallies to 95.24 After RBI Pauses Repo Rate and Boosts Foreign Inflow Norms

The Indian rupee reversed its recent downward trajectory, surging by 50 paise to strike 95.24 against the US dollar. The rebound hit immediately after the Reserve Bank of India rolled out structural capital market reforms to pull in overseas greenbacks.

The domestic currency began the session at 95.72, tracking Thursday's close of 95.74. However, heavy institutional dollar unwinding quickly took over the interbank foreign exchange market, pushing the currency to its strongest intraday level in days as traders reacted to policy relief announced by the RBI.

What Triggered the Forex Surge?

The main driver behind the rupee's recovery was the RBI’s decision to open up capital entry points. The central bank completely removed short-term investment and concentration limits on Foreign Portfolio Investor (FPI) placements under the General Route.

Furthermore, the central bank expanded the list of specified government bonds under the Fully Accessible Route (FAR). It added all new 15-year, 30-year, and 40-year government securities to the program.

To maximize capital entry, the RBI also raised investment limits for Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) trading in the equity market. Governor Malhotra noted that these updates, combined with fresh government tax incentives for foreign debt investors, will increase capital inflows.

Shielding Rupee

The heavy intervention comes as the currency faces sustained pressure from global energy markets. The escalating conflict in West Asia has disrupted trade routes and kept global crude oil prices high. Because India imports a massive amount of its oil, these external forces directly threaten the local currency and domestic price stability.

To account for these risks, the RBI raised its consumer price inflation forecast for the fiscal year to 5.1%, up from 4.6%. Concurrently, the central bank trimmed its real GDP growth projection to 6.6% from 6.9%.

Heavy Forex Reserves

The rupee had faced prolonged downward pressure over the last quarter, tracking persistent equity outflows and a strong dollar index. However, the RBI reassured financial markets that India's macroeconomic fundamentals remain secure. The governor confirmed that the nation's foreign exchange reserves stand at a healthy $682.3 billion. 

Also read: Price Growth To Hit 5.9%: RBI Raises Inflation Target Over Oil Shocks