In a decisive move to stabilize the Indian rupee against persistent global pressures, the Reserve Bank of India (RBI) executed a significant shift in its foreign exchange market operations during the first ten months of 2025. Data reveals the central bank became a net seller of the US dollar, offloading a substantial $31.98 billion on a net basis between January and October.
A Dramatic Policy Reversal
This aggressive stance marks a sharp turnaround from the RBI's strategy in the corresponding period of 2024, when it was a net buyer, accumulating $23.03 billion. The intervention underscores the central bank's focused efforts to curb excessive volatility, driven by a strong US dollar, shifting global capital flows, and uncertainty surrounding international interest rate paths.
Despite these substantial efforts, the rupee depreciated by 3.3 per cent between January and October 2025. This decline was steeper than the 2.2 per cent drop witnessed in the same period of 2024, highlighting the intensity of external headwinds. Economists note that the RBI's objective was to smooth the currency's movements rather than defend a specific exchange rate level.
Scale and Strategy of Intervention
The scale of the RBI's activity is even more apparent in gross terms. During the ten-month period in 2025, the central bank sold a massive $207.96 billion worth of dollars on a gross basis, signaling intense spot market interventions. This figure represents a 35 per cent jump from the $154.5 billion sold in January-October 2024. Consequently, the average monthly dollar sales surged to nearly $21 billion in 2025, compared to $15.45 billion in the previous year.
Madan Sabnavis, Chief Economist at Bank of Baroda, commented, "The higher gross dollar sales number was expected as there has been higher intervention by the RBI this year because the rupee has been extremely volatile." On the purchase side, the RBI bought $175.97 billion in 2025, slightly lower than the $177.53 billion purchased in 2024.
Experts point to a tactical evolution in the central bank's approach. Anindya Banerjee, Head of Currency and Commodity Research at Kotak Securities, observed, "2025 marks a clear evolution in RBI's FX playbook. More selling, more forwards, less optics, more finesse. RBI is no longer just managing the currency—it is managing expectations, liquidity, and macro trade-offs simultaneously."
The Growing Role of Forward Markets
A key feature of the 2025 strategy was the increased use of forward market interventions. By the end of October 2025, the RBI's outstanding net forward sales had ballooned to $63.6 billion, a significant increase from $49.18 billion in October 2024.
Dipti Chitale, CEO of Mecklai Financial Services, explained this shift: "The sharp increase in RBI's net forward dollar sales, up nearly 30 per cent year-on-year, marks a significant shift in the intervention mix. This highlights RBI's greater reliance on the forward and swap markets rather than outright spot intervention." She added that this method allows for more efficient liquidity management, smoothes the impact on forex reserves, and reduces market disruption by spreading dollar supply over time. However, she also cautioned that a rising forward book creates future dollar delivery obligations, necessitating careful liquidity planning.
Chitale further contrasted the two years: "In 2024, RBI's net purchase position reflected a bias towards reserve accumulation and curbing excessive rupee appreciation. In contrast, 2025 intervention has been far more two-way and tactical, indicating RBI's intent to smooth volatility."
The most active period within the timeframe was January-March 2025, where gross dollar purchases slightly exceeded sales. Notably, January 2025 alone saw sales of $60.28 billion, the highest monthly figure in the first ten months of the year. India's foreign exchange reserves stood at a robust $693.3 billion as of December 19, 2025, providing the central bank with ample firepower to manage currency stability.
