RBI Sells Dollars to Stabilize Rupee Amid Gulf Conflict and Rising Oil Prices

The Reserve Bank of India has intervened heavily in the spot market by selling dollars since February 28, 2026, when the Iran war began, to prevent a sharp depreciation spiral of the rupee. 5 band as of April 24, 2026. Feeble signs of de-escalation are emerging from the Gulf conflict as of April 24, 2026, with backchannel engagements between the United States and Iran resuming.

The Indian crude oil basket spiked beyond $150 per barrel at the peak of energy supply disruption and is hovering around $105 to $110 per barrel as of April 24, 2026. The RBI forced the unwinding of an estimated $30 billion to $40 billion of arbitrage positions between offshore and onshore markets through March and early April 2026.

The RBI tightened banks’ open currency positions and restricted corporates from rebooking cancelled forward contracts. 6 lakh crore in January 2026 but was steadily absorbed, bringing conditions close to neutral by mid-April 2026. Short-term funding costs hardened by 35 to 60 basis points.

One-year hedging premiums rose by 40 to 75 basis points at peak stress. India’s top 100 corporates manage foreign exchange exposure of over Rs 20 lakh crore to Rs 22 lakh crore. Historically, 35-45 per cent of India’s top 100 corporates' foreign exchange exposure is hedged, but hedge ratios have increased by 8-12 percentage points since March 2026.

On peak days, offshore participation surged to $3 billion to $4 billion. Corporate India is absorbing Rs 20,000 crore to Rs 40,000 crore of incremental costs over a six-month period. 5 lakh crore in annual profits.

Credit growth remains steady at around 13-15 per cent. S. dollar, supported by steady oil revenue inflows. Felix Prehn stated that the peg remains stable as long as oil money continues to flow without interruption.

Felix Prehn explained that if reserves begin to decline, speculators could target the peg. Felix Prehn described speculators moving in for the kill once vulnerabilities appear, akin to pressure on the British pound in the past.