India’s foreign‑exchange reserves of over $700 billion are large enough to deter speculative moves and allow the Reserve Bank of India to intervene to stabilise the rupee, a report said on Tuesday. 

The report from SBI Research said current reserve levels are equivalent to more than 10 months of imports and that short‑term debt is below 20 per cent of reserves, providing room and time to intervene in the market to prop up the rupee if it is so desirable.

The research firm, however, flagged that volatile capital flows and elevated oil prices pose risks to the near‑term outlook and urged several policy moves, including a special dollar window for oil marketing companies to meet the daily demand of $250–300 million.

“This should allow better visibility on genuine FX demand and supply dynamics and in measuring the efficacy of various countermeasures initiated by the regulator to curb unwarranted volatility,” the report said.

It cited the Committee on Capital Account Convertibility, saying current forex reserves are much higher than the desirable level of at least six months of imports, but the short-term debt and portfolio stock is higher than the desirable level of no more than 60 per cent of the level of reserves.

The report also called for $100 million caps on trading books only, and not on the whole bank book level, as it creates operational challenges.

It suggested an ‘Operation Twist’ to raise short‑term yields while lowering long‑term yields, “ensuring various reference rates remain within the prescribed bands, aligned with policy rate.”

The Central Bank has “taken the cudgels to support the rupee”, but the firm urged accelerating interventions by bringing currencies in demand from outside markets and incorporating alternative mechanisms (like a special USD window for OMCs) since the fall of the rupee exceeds the macro fundamentals of the country by a wide margin.