RBI in Action: The Master Plan in Place to Halt the Rupee Fall

The rupee‘s slide is not a three-month old story from the West-Asia conflict, as some would believe. It’s a sad story that continued to frustrate policy makers despite repeated intervention attempts to curb the slide ending in vain. The rupee fell from 85 in mid-2025 to 90 against the US dollar when the war began in the Middle East. The war further escalated the fall as the rupee fell to a record low of 96.80 on May 20, 2026. According to news reports, the fall from 90-95 has been the fastest decline in nearly a decade, according to a Money Control report. Concerned by the non-stop decline, the Reserve Bank of India (RBI) is contemplating a series of measures to help stabilize the rupee.

So, What Actually is RBI Considering to Stop the Rupee Slump?

RBI Governor Sanjay Malhotra, along with the RBI officials have conducted a series of meetings to review potential steps to contain the rupee slide, according to news reports from a credible journal, Bloomberg.

The Interest Rate Hike

Among the measures examined was the possibility of raising interest rates. It will be interesting to see whether the RBI will hike rates in its scheduled policy meeting on June 5, 2026, or do it before seeing the largely day-to-day fall in the rupee value against the US dollar. Earlier in May 2022, the RBI raised the interest rate before the scheduled meeting.

But How Can the Interest Rate Hike Curb the Rupee Fall?

So far in 2026, the RBI‘s benchmark policy rate has remained unchanged at 5.25%. While the interest rate hike is imminent due to crude oil price-led inflation, raising it has a sound logic amid the rupee fall. Raising the interest rates is believed to contain its slide by widening the yield gap between US and Indian bonds, encouraging foreign investors to maintain their capital in India instead of withdrawing it from the country. The interest rate hike also assumes significance amid the outflow of funds from the Indian market by foreign investors in 2026. According to reports, equity outflow already breached last year’s record peak of $19 billion.

The Plan to Raise Dollar Inflows from Overseas Investors

The RBI officials are stepping up efforts to increase the flow of dollars from overseas investors. Among the dollar inflow-raising measures is including a foreign currency deposit scheme for non-resident Indians (NRIs) and the likely issuance of a sovereign dollar bond.

This plan at work is inspired by the 2013 taper tantrum when the rupee fell from 60 to 65 within a month. At that time, the RBI launched a deposit scheme through local banks to increase the flow of foreign currency by non-residents. According to an RBI official, the move might bring in $50 billion this time as opposed to $30 billion in 2013.

$5 Billion Swap Auction Already Announced, More Such Actions Likely Soon

The RBI, earlier this week, announced a $5 billion swap auction to inject liquidity into the banking system and add to Indias forex reserve kitty. It is widely speculated that more such swap auctions could happen soon to stabilize the rupee.

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