According to Reuters, the RBI is studying ways to attract fresh dollar inflows, including reviving a special deposit window for non-resident Indians and easing tax rules for foreign investors in government bonds, as pressure builds on the rupee amid the Iran conflict, rising oil prices and persistent capital outflows.
The rupee on Monday closed at a record low of 95.08 against the US dollar, down 0.18% from the previous close, after touching an all-time low last week. The currency has now weakened nearly 5.5% in 2026, making it one of the worst-performing Asian currencies this year.
Nandish Shah, Deputy Vice President at HDFC Securities, said the pressure remains intense.
“The rupee depreciated for the fourth consecutive session, falling to a record low. Strength in the US dollar and elevated crude oil prices remain key pressure points. Persistent foreign fund outflows are further weighing on the currency, raising concerns around India’s trade balance and macro stability,” he said.
What is the RBI considering?
Reuters reported that one option being discussed inside the central bank is bringing back a special NRI dollar deposit scheme, similar to the one used in 2013 when India was hit by the “taper tantrum.”
Back then, the RBI allowed banks to mobilise dollar deposits from overseas Indians and swap them with the central bank at concessional rates, helping bring in roughly $26 billion and stabilising the rupee.A second option under discussion, Reuters reported, is removing the 5% withholding tax on foreign investors in Indian government bonds, a move that could encourage overseas debt inflows.
No final decision has been taken yet, and any tax-related change would require government approval, Reuters said, citing people familiar with the matter.
Why is the RBI worried now?
Oil prices have surged after the Iran conflict disrupted shipping routes and raised fears over supplies through the Strait of Hormuz. For an oil-importing economy like India, higher crude prices directly widen the import bill and increase dollar demand.
At the same time, foreign investors have pulled nearly $20 billion from Indian equities over recent months, adding pressure on the currency.
India’s forex reserves, while still substantial at around $698 billion, have fallen from a peak of $728.5 billion, according to Reuters. The central bank has also been intervening aggressively in both spot and forward markets to smooth volatility.
Will the 2013 playbook work again?
Analysts say the tools can help, but the backdrop is very different this time. In 2013, global interest rates were near zero, and India’s reserve position was far weaker. Today, reserves are much larger, but dollar strength, geopolitical risks and global yields are also significantly higher.
Jateen Trivedi, VP Research Analyst at LKP Securities, said the near-term trend for the rupee remains fragile.
“Rupee weakened further, slipping below 95.05, as sustained FII outflows and crude prices above $100 continued to pressure the currency. Elevated oil prices are increasing India’s import bill and keeping inflation concerns high, limiting any recovery in the rupee,” he said.
Also read: Rupee sinks to fresh closing low of 95.08 against USD on NDF maturities, firm crude
He sees 94.50 as immediate resistance and 95.40 as key support in the near term, adding that US payroll and unemployment data this week could further influence dollar strength.
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