India's central bank is burning through a record amount of financial ammunition to keep the rupee from cratering. The Reserve Bank of India's forward dollar-selling contracts have crossed the $110 billion mark, reaching an estimated $110-115 billion in early June 2026, a record for the institution's net-short dollar book.
Think of it like this: instead of selling dollars from its vault today and watching reserves drain in real time, the RBI is writing IOUs to sell dollars at a future date. It's a way to defend the currency now while kicking the reserve hit down the road. The problem is that the IOUs are piling up fast, and the road isn't getting any longer.
The rupee slid past 96 per US dollar in May 2026, touching an all-time low that forced the RBI's hand. That kind of depreciation makes oil imports more expensive, feeds into inflation, and rattles foreign investors holding rupee-denominated assets. India imports roughly 85% of its crude oil needs.
The cost has been visible on the balance sheet. India's forex reserves dropped from $728.49 billion in February 2026 to roughly $688 billion by late March. That's a $40 billion decline in a single month.
The forward sales strategy itself carries a subtle risk. Those contracts eventually mature, meaning the RBI will need to deliver dollars at the agreed-upon future dates. If the rupee hasn't stabilized by then, the central bank could face a situation where it's simultaneously defending the currency in real time and settling old commitments.