RBI's aggressive measures may lift rupee to 94.50 per dollar in short term: SBI Research

The Indian rupee may test the 94.50-per-dollar level in the short term after the Reserve Bank's aggressive measures to curb depreciation, SBI Research said.

The rupee rose 62 paise to 95.16 against US dollar in early trade on Tuesday, a day after it jumped 93 paise to close at 95.78 after the RBI stepped in with several measures over the weekend aimed at bolstering the domestic currency.

In its latest Ecowrap report dated October 12, SBI Research said the RBI's measures to support the rupee include a special dollar supply window for three state-run oil marketing companies, tighter liquidity conditions and curbs on currency derivative positions.

The RBI has opened a direct dollar supply window for Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation to meet their daily foreign exchange requirements, shifting an estimated $10-12 billion per month away from the open spot market.

The report said the intervention marks a departure from earlier measures adopted during the 2008 global financial crisis and the 2013 taper tantrum, when the central bank used repayable foreign exchange swaps.

The RBI has also raised the daily cash reserve ratio (CRR) maintenance requirement for banks to 99% from 90%, effective from the reporting fortnight beginning October 16, 2026. It has retained the requirement that the average CRR maintenance over the 15-day period be 100%.

The central bank has announced an open market sale of government securities worth ₹25,000 crore and introduced a Foreign Exchange Risk Reserve (FERR) requirement for eligible currency derivative transactions exceeding $2 million.

Under the FERR framework, authorised dealers are required to maintain a cash reserve with the RBI equivalent to 20% of the rupee value of the notional amount of eligible transactions.

SBI Research estimated that the FERR requirement could lead to reserves of around ₹80,000 crore against fresh contracts, assuming monthly transaction volumes remain at their recent average.

The measures could withdraw more than ₹1 lakh crore from the banking system over time, it said.

The RBI has also capped currency derivative positions and barred users from rebooking cancelled foreign exchange derivative contracts involving the rupee.

However, SBI Research said the central bank's interventions alone would not be sufficient to ensure a sustained recovery in the rupee, given persistent external pressures, including elevated crude oil prices and the outlook for US bond yields.

Its forecasts indicate that Brent crude prices could rise from around $103.4 per barrel to $110 over the next 10 trading days, while the Indian crude oil basket could increase from about $127 to $130 per barrel.

The report also expects US 10-year Treasury yields to face upward pressure over the next three to six months, limiting the scope for a sustained decline unless inflation eases or economic activity weakens.

SBI Research called for government measures to attract foreign capital, particularly into the equity market, amid sustained foreign portfolio investor (FPI) outflows.

According to the report, cumulative FPI outflows from the equity segment amounted to ₹3.51 lakh crore between 2021 and September 2026. Outflows exceeded ₹2.61 lakh crore in 2026 alone, in addition to ₹1.66 lakh crore in 2025.

The report also flagged equity outflows of $13 billion in the current financial year.

To encourage longer-term investments, SBI Research suggested considering the abolition of long-term capital gains tax on equities for investors who hold their investments for two to three years. It also called for greater clarity on withholding tax applicable to external commercial borrowings, particularly in relation to benefits under double taxation avoidance agreements.

The report further recommended streamlining the repatriation of export proceeds within a reasonable period, such as six months, with extensions granted on a case-by-case basis.

SBI Research also suggested that the RBI could consider widening the liquidity adjustment facility corridor by raising the marginal standing facility rate after liquidity conditions have tightened.