Mumbai, Sep 3: The Indian rupee strengthened sharply on Thursday after the Reserve Bank of India (RBI) reported a much stronger-than-expected response to its special foreign currency mobilisation measures.
The rupee rose as much as 0.7 per cent to around Rs 94.27 against the US dollar, marking its strongest level in more than a month. The improvement in the currency came as the massive inflows provided the RBI with greater flexibility to manage pressure on the rupee.
Indian banks mobilised about $127.2 billion through Foreign Currency Non-Resident (Bank), or FCNR(B), deposits before the special window closed on August 31. Including inflows through Overseas Foreign Currency Borrowings and External Commercial Borrowings, total foreign currency mobilisation reached around $136.4 billion.
The response was significantly higher than the initial expectations. The strong inflows have strengthened India’s foreign exchange position and are expected to provide additional support to the balance of payments.
For banks, the increased availability of foreign currency could also support lending activity and improve liquidity conditions. The impact is expected to be particularly relevant as financial institutions continue to meet the funding needs of businesses and the wider economy.
The large inflows have also given the central bank a stronger buffer to manage currency volatility. India’s foreign exchange reserves had already reached a record level of $729.3 billion, further strengthening the country’s external financial position.
However, the rupee could continue to face pressure from factors such as crude oil prices, global interest rates and geopolitical uncertainty. These external developments are likely to remain important for currency markets in the coming weeks.
The strong response to the RBI’s special measures marks a significant boost for India’s foreign exchange position and provides greater financial stability at a time when global markets remain volatile.