RBI announced its foreign‑exchange reserves hit $785.71 billion in the week ending 4 September 2026, the highest level since 2010. The jump was largely driven by a $136.38 billion inflow under the FCNR(B) deposit scheme that allows non‑resident Indians to park dollars with banks that swap them with the RBI.
But the surge does not equate to a stronger rupee. Because the FCNR(B) deposits are settled on RBI books rather than sold in the open market, the extra dollars do not enter the foreign‑exchange market to push the currency higher. Divya Mandaliya, commodities analyst at Anand Rathi, said the reserve number swells, but the cash stays parked.
In March 2026 the RBI sold dollars to defend the rupee amid an oil‑price spike, draining reserves by more than $100 billion and slashing them to $666.9 billion by late June. Yet the rupee still hovered near 96.67, only a touch above its all‑time low of 96.96 recorded in May 2025.
Underlying pressures are still strong. India's trade deficit widened to $32 billion in July, and foreign investors pulled $29‑30 billion from equities in August—a record outflow. With Brent crude above $109 a barrel, FIIs withdrew Rs 13,138 crore in the first two weeks of September, pushing the year‑to‑date outflow to $27 billion.
RBI says it can smooth sharp spikes, but reserves cannot act as a floor against a sustained drag from oil, a widening trade gap and investor fears. Ranen Banerjee of PwC India warned that global dollar demand and attractive U.S. bond yields make Indian markets less appealing, keeping the rupee under pressure.
For traders in Mumbai, the reality is a bruised pocket. A small‑scale exporter, Mira Patel, said she has to hedge her invoices at 96.5, cutting her profit margin by 1.5 %. If the RBI intervenes again, she hopes the rupee will stabilize enough to keep her cash flows predictable.