India’s RBI builds record $200.1 billion forward dollar position

The Reserve Bank of India’s net short dollar position rose to a record $200.1 billion in August, Bloomberg reported. The position increased $63.3 billion from July, according to calculations based on RBI data. The jump marks the first time the central bank’s net short dollar book has exceeded $200 billion.

The increase followed large foreign-currency inflows under RBI measures designed to attract overseas deposits and strengthen external liquidity. Contracts maturing beyond one year drove much of the rise, with short positions in that segment reaching $176.6 billion from $91.5 billion previously. Separately, Reuters reported that policy-linked inflows reached $143.5 billion between June 8 and September 18, while foreign exchange reserves climbed to a record $785.7 billion.

The RBI has since used dollar-rupee sell-buy swaps to manage the forward book and absorb excess rupee liquidity. Market participants expect these operations to gradually reduce the central bank’s forward dollar liabilities.