Overview
- The Reserve Bank of India’s net-short forward position has climbed to about $110–$115 billion in early June after stepped-up use of forward contracts and offshore non-deliverable forwards.
- Officials have relied on short-dated offshore NDFs that typically mature in one to three months together with onshore dollar swaps longer than a year to manage domestic liquidity without immediate reserve outflows.
- India’s foreign-exchange reserves have fallen by more than $40 billion since late February to roughly $682.3 billion, a rapid drawdown that narrows the central bank’s buffer.
- The rupee has shown episodic volatility in early June, trading in the mid-95s per dollar as geopolitical-driven oil price swings and portfolio flows push importer and investor dollar demand.
- Because forward contracts must be settled when they mature, the stock of short-dated obligations will create recurring dollar demand that could cap any sustained rupee recovery unless renewed capital inflows let the RBI unwind its short book.