RBI’s sell-buy swaps slow rupee’s fall but push up forward premiums, making hedging costlier for foreign investors

The Reserve Bank of India is engaged in dollar sell-buy swaps to stabilize the rupee's value.

However, this has resulted in higher forward premiums, making it expensive for foreign investors to hedge.

As a consequence, some foreign investments in rupee-denominated assets may decline.

Additionally, companies are opting to borrow in rupees and exchange for dollars due to favorable local rates.