Mumbai, December 23, 2025 – Bankers are calling on the Reserve Bank of India (RBI) to intervene as a surge in dollar liquidity and pressure in the non-deliverable forward (NDF) market push rupee forward premiums to levels not seen in over six years.

According to market sources, the one-month dollar/rupee forward premium climbed to 55 paisa on Tuesday, more than triple its level at the end of November. The rupee remains Asia’s worst-performing currency this year, weighed down by weak investment flows, steep U.S. tariffs, and uncertainty over a U.S.-India trade deal.

“The market is convinced the INR must weaken materially in the absence of a U.S. trade deal,” said Dhiraj Nim, economist and FX strategist at ANZ.

Dollar Glut and Forward Market Pressure

Year-end regulatory and balance-sheet constraints are limiting banks’ ability to manage excess dollar liquidity through interbank deposits. As a result, banks are turning to dollar-rupee sell/buy swaps, driving premiums higher, particularly in shorter maturities.

Economist Tanay Dalal of Axis Bank highlighted that widening NDF premiums are compounding the pressure, signaling offshore expectations for the rupee to dip below 90 in the near term. The rupee hit a record low of 91.075 earlier this month, but RBI intervention in the spot market helped stabilize it temporarily.

Banks have noted that the RBI’s spot market dollar sales are contributing to the current liquidity surplus, creating a mismatch between demand in the forward market and supply in the spot market.

Calls for RBI Intervention

Market participants are urging the RBI to take measures such as dollar liquidity draining via buy/sell swaps, which could:

1. Bring forward premiums down.
2. Reduce pressure on MIFOR (the benchmark for domestic swaps).
3. Allow RBI forward short positions to be better staggered over time.

“Continued auctions of buy/sell swaps by the RBI can have the triple benefit of stabilizing the market,” Dalal said.

Bankers emphasize that timely intervention is critical to normalizing dollar liquidity, balancing the twin priorities of curbing rupee volatility and maintaining effective monetary policy transmission.

Key Takeaways

• Dollar/rupee forward premiums hit six-year highs amid year-end liquidity surges.
• Rupee remains Asia’s weakest currency due to tariffs, trade uncertainty, and weak inflows.
• NDF market pressure signals offshore expectations of further depreciation.
• RBI intervention, including buy/sell swap auctions, is widely recommended to stabilize markets.
• Spot market sales alone are insufficient, creating a mismatch across tenors.