The Reserve of India amassed a record $106.7 billion short dollar forward position by May, the largest bearish dollar bet among major central banks, to prop up the rupee without draining spot reserves. Unwinding that book now means buying dollars with rupees — a mechanical reversal that reapplies depreciation pressure on the currency.

Last year the RBI shrank the position by $35 billion over six months through August, and the rupee weakened 0.8%, making it the sole emerging Asian currency to fall against the dollar in 2023. Since mid‑June the offshore portion has been trimmed by $10 billion to $15 billion, while roughly $20 billion of short‑term maturities rolled off in the past fortnight alone.

Governor Sanjay Malhotra insists the central bank sees no fresh pressure but is prepared for any outcome. To ease the exit, the RBI now offers to cover hedging costs for banks raising three‑ to five‑year foreign‑currency deposits from non‑resident Indians, a bid to lock in stable funding ahead of a maturity wall.

The rupee traded at 95.39 per dollar Thursday, down nearly 6% this year — second‑worst in Asia after the rupiah. With $29 billion maturing within three months and $51 billion over one year, the RBI is front‑loading rollover risk; the currency’s slide suggests markets doubt a smooth exit without further reserve drawdowns or rate support.