RBI Hits 11-Month High with $7.4 Billion Net Dollar Purchase in February

The Reserve Bank of India reported net purchases of $7.409 billion in the spot foreign exchange market in February, according to its monthly bulletin. This is the highest monthly net buying since March 2025.  

Gross purchases stood at $21.403 billion, while sales were $13.994 billion during the month. 

Return to Dollar Purchases 

The latest data extends a shift seen in January, when the central bank turned a net buyer with purchases of $2.526 billion.  

This follows a prolonged phase of net selling between June and December 2025. During those seven months, net sales ranged from $2.540 billion to $11.877 billion. 

Rupee Movement and Volatility 

The rupee strengthened at the start of February after the announcement of an interim trade arrangement between India and the United States.  

However, it weakened in March amid rising tensions in West Asia. The central bank noted that while implied volatility moderated in the latter half of the financial year, it remained elevated due to global uncertainty. 

On a broader basis, the rupee depreciated 6.2% against the US dollar in the second half of FY26. In real effective terms, it declined 3.3% between September 2025 and February 2026. The real effective exchange rate stood at 91.23 in March. 

Measure on Dealer Positions 

In a step to manage market conditions, the RBI introduced a prudential limit on 27 March 2026. Authorised dealers were required to keep their net open positions in the rupee within $100 million at the end of each trading day.  

The measure was aimed at reducing excessive speculative positions in the onshore currency market. 

FDI Flows Show Improvement 

Foreign Direct Investment flows turned positive in February after remaining negative for 6 months. Net FDI stood at $4.6 billion, compared with negative $703 million in February 2025 and negative $1.4 billion in January 2026. 

Gross inward FDI rose to $8.98 billion from $5.56 billion a year earlier. Repatriation declined to $1.7 billion from $2.5 billion, while net outward FDI fell 31.03% year-on-year to $2.63 billion. 

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Conclusion 

February data shows higher dollar purchases by the central bank alongside an improvement in investment flows, even as currency pressures linked to global factors remained. 

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