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The Reserve Bank of India net bought $561 million in June, marking its first net purchase since February, as strategic measures by the RBI and government aimed at attracting foreign capital led to a 0.36 per cent appreciation of the rupee against the dollar.
Photograph: Francis Mascarenhas/Reuters
Key Points
- The Reserve Bank of India (RBI) net bought $561 million in June, marking its first net purchase since February after three months of net sales.
- This intervention followed a period of forex market intervention during the West Asia crisis, where the RBI was a net seller.
- The rupee appreciated by 0.36 per cent against the dollar in June, coinciding with the RBI’s net purchases.
- Both the RBI and the government introduced measures to attract foreign capital, including expanding the Fully Accessible Route (FAR) for government securities and offering concessional foreign exchange swap facilities.
- The government also exempted foreign portfolio investors from tax on interest income and capital gains from government securities, effective April 1, 2026.
The Reserve Bank of India (RBI) net bought $561 million in June, against a net sale of $6.10 billion in May.
This was the RBI’s first net purchase since February, after it remained a net seller for three consecutive months amid forex market intervention during the West Asia crisis.
It bought $30.89 billion and sold $30.33 billion during the month.
The rupee appreciated 0.36 per cent against the dollar in June.
Measures to Attract Foreign Capital
The RBI and the government announced a series of measures in June to attract foreign capital.
The RBI expanded the Fully Accessible Route (FAR) to include 15-year, 30-year and 40-year government securities, allowing foreign investors to invest in them without existing maturity restrictions.
It also introduced a concessional foreign exchange swap facility for eligible external commercial borrowings and allowed banks to raise fresh three-to-five-year FCNR(B) deposits, with the RBI bearing the full hedging cost.
Separately, the government exempted foreign portfolio investors from tax on interest income and capital gains arising from government securities, effective April 1, 2026.
The move was aimed at improving post-tax returns and making Indian government bonds more attractive to overseas investors.
Forex Holdings and Market Positions
The RBI’s gold holdings remained unchanged at 880.52 metric tonnes as of the week ended July 31.
The outstanding net short dollar position in the forward market fell to $103.33 billion at the end of June from $106.67 billion a month earlier.
Short positions with maturities of less than one year fell to $40.33 billion from $50.59 billion, while those with maturities of more than one year rose by $8 billion to $64.21 billion.
Of the total net short dollar position, $10.18 billion was in one-month contracts, $5.73 billion in one-to-three-month contracts and $24.42 billion in contracts maturing between three months and a year.
The remaining $64.21 billion was in contracts with maturities of more than a year.
Rupee’s Real Effective Exchange Rate
The rupee’s Real Effective Exchange Rate (REER) stood at 91.75 in July, up from 91.26 in June.
The REER adjusts the Nominal Effective Exchange Rate (NEER) for inflation differentials between India and its major trading partners.
A REER above 100 indicates an appreciation relative to the base year, which can potentially make Indian exports less competitive.
