The Reserve Bank of India withdrew a $50 billion foreign-exchange swap scheme just weeks after launching it, raising concerns over the clarity and strategic planning of its currency stabilisation measures during a period of economic uncertainty.
India’s central bank has raised questions about whether its latest foreign-exchange operation was designed with enough clarity or discipline. The Reserve Bank of India opened a series of swap measures in response to pressure on the rupee, but then shut the scheme after attracting just over $50 billion, far less than the $80 billion to $100 billion some analysts had expected.
The move came at a time when the currency was already vulnerable. The war involving Iran had pushed up crude prices, which threatened to widen India’s current account deficit, while foreign portfolio investors were still selling amid global uncertainty. In that environment, the RBI’s actions were widely read as an attempt to build reserves and discourage speculative bets against the rupee, a tactic that can work when markets fear a sharper slide.
Earlier in the summer, the central bank had already rolled out a package of measures to pull in foreign capital. Business Standard reported in July that the RBI had attracted more than $20 billion through foreign exchange steps, including zero-cost swaps on FCNR deposits, facilities for external commercial borrowings and overseas foreign currency borrowings. In June, it also announced five broader measures, among them a concessional swap window for public sector external borrowing and changes to rules governing foreign portfolio investment and non-resident participation in Indian securities.
That backdrop makes the abrupt closure of the scheme harder to understand. The central bank had not signalled at its August 5 post-policy briefing that a premature end was imminent, yet nine days later it did just that. For critics, the sequence suggests a gap between design and execution: if the aim was to shore up reserves, why stop well short of the amounts market participants had anticipated? And if the risk was that a larger inflow might have strengthened the rupee too much or added liquidity to the banking system, the RBI would have been expected to plan for those side effects in advance.
India’s foreign-exchange stockpile was still substantial when the programme was launched, with reserves around $680 billion to $690 billion, according to previous Business Standard reporting. Economists had argued that the country had enough buffer to absorb the oil shock and cushion volatility, even if the current account came under strain. That is why the RBI’s sudden reversal now looks less like a routine technical adjustment than a policy decision that raises fresh doubts about how fully the scheme was thought through.
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