What RBI Does Normally | Role of RBI Explained Simply | Why RBI’s Move Is Different This Time

To control or bring down the dollar rate, RBI introduced this limit. In fact, it is being said that this is one of the biggest steps taken by RBI in the last 10 years to control the dollar. Now, what does RBI normally do? Whenever RBI wants to control the dollar rate, it usually sells dollars from its foreign exchange reserves. By supplying dollars in the market, it tries to reduce the price of the dollar. But there’s a limitation. Think about it: A few years ago, the dollar was around ₹60–70 Then it moved to ₹75–80 And now it has reached ₹94–95 So, can RBI keep controlling it just by selling dollars? Not really. Because RBI cannot keep selling its entire dollar reserves. That is not sustainable. So, instead of only relying on reserves, RBI has to use other mechanisms to control the situation. 👉 And this step—limiting banks’ positions—was one such mechanism. Hope this makes it clear 👍 --- To control the fall of the rupee, RBI took a major step. On 1st March, $1 = ₹91 By 27th March, it rose to ₹95. To stop this rise, RBI asked banks to limit their foreign currency positions (NOP) and unwind excess positions. Why? Banks were doing arbitrage: Buying dollars in India (₹94.10) Selling in offshore markets like Singapore (₹94.50) ➡️ Earning easy profit from the gap This increased demand for dollars, pushing the price up. Now, RBI forced banks to sell dollars and reduce positions ➡️ Dollar supply increased ➡️ Dollar price fell Result: ₹95 → ₹93 (after the announcement) 👉 A strong move by RBI to control rupee depreciation. 📞 🌐 #RBI #Rupee #Forex #CurrencyMarket #IndianEconomy #FinanceSimplified #CAStudents #Accounting #IndAS #EconomyExplained #StockMarketIndia #FinancialEducation #SAGC