RBI pared back forward-dollar short position to $53 billion in August

The central bank has unwound $37 billion in forward-dollar shorts since February, allowing maturities to lapse and rebalancing exposure as it manages rupee volatility and liquidity

The Reserve Bank of India (RBI) has steadily pared back its forward-dollar short position over the past year, trimming exposure from nearly $90 billion at its peak in February-end to around $53 billion by August-end, latest data by the RBI showed. 

 

The central bank has been taking full delivery of maturing contracts despite external pressures on the rupee.

 

In early 2025, the RBI’s net short position in the forward book had swollen to $88.7 billion. This came as the central bank intervened in all the three markets to stabilise the rupee and manage persistent capital outflows.

 

Analysts, however, warned that such large forward commitments effectively eroded the “usable” portion of India’s foreign exchange reserves, since these future obligations would eventually need to be settled in dollars.

 

 

The RBI then began a measured reversal and not a sharp pivot.

 

Following a five-month streak of rising net short dollar positions in the forwards book through February, the central bank started trimming its dollar exposure in March.

 

By April, the net short position had already dropped to $72.4 billion, and continued to fall in subsequent months, at $65.2 billion by May. It fell to $60.3 billion by June, $57.9 billion by July, and $53 billion by August.

 

“Many short-term contracts matured naturally, and the RBI chose not to roll them over, allowing attrition to do much of the work. In some months, it also reduced positions where market conditions were favourable,” said a senior executive at a brokerage firm.