The Reserve Bank of India (RBI) net purchased USD 43.264 billion in the spot currency market in August, according to the central bank's monthly bulletin released on Friday.
The surge came on the back of the RBI's concessional swap facility for foreign currency non-resident (bank), or FCNR(B).
This is the third consecutive month when the central bank purchased dollars from the spot market.
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The central bank bought USD 18.652 billion in July and USD 561 million in June. However, in May, there was an outflow of USD 6.104 billion.
On a gross basis, the central bank purchased USD 74.472 billion in August and sold USD 31.208 billion, as per the monthly bulletin.
Net inflows under non-resident deposits surged in August 2026, mainly supported by an increase in FCNR(B) deposits on account of the special USD-INR forex swap facility of the RBI.
Consequently, the share of FCNR(B) deposits in total outstanding non-resident deposits rose sharply at the end of August 2026, RBI said.
The Indian rupee (INR) was supported by robust FCNR(B) deposit inflows in early September 2026; subsequently, these gains were reversed due to higher crude oil prices.
The INR exhibited a depreciating bias since late September owing to a stronger US dollar and surging crude oil prices. INR appreciated in mid-October, supported by the Reserve Bank's measures to curb speculative dollar demand and a softer US dollar.
Looking ahead, the INR may face headwinds, including a robust US dollar, elevated import cost, volatile capital inflows and rise in trade policy uncertainties. Any escalation in geopolitical tensions or unexpectedly aggressive monetary tightening by major central banks may put pressure on INR, the bulletin said.
Conversely, the INR could find support from the resilience of India's services exports, the stability in bilateral trade frameworks and sustained foreign capital inflows, the bulletin added.
On Friday, the rupee depreciated for the second consecutive day and settled 12 paise lower at 94.93 against the US dollar, pressured by rising crude prices and sluggish domestic equities, with ongoing Saudi-Houthi tensions threatening to keep oil markets volatile.
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