- NRI deposit schemes are costly band-aids, not solutions.
The Reserve Bank of India should not let the rupee’s slide toward Rs 100 to the dollar drive its policy decisions, Arvind Panagariya, Chairman of the 16th Finance Commission and former Vice-Chairman of NITI Aayog, has said.
“Do not let the psychology of Rs 100 per dollar determine your policy response. 100 is just a number, like 99 and 101,” Panagariya wrote on X.
The rupee is currently the worst-performing Asian currency, having depreciated 6.6 per cent in 2026. On Thursday, it reversed a nine-day losing streak to gain 0.65 per cent and close at Rs 96.20 to the dollar.
Let It Depreciate, Whatever Happens With Oil
Panagariya’s core argument is straightforward: in the face of the current oil shortage, depreciation is the only rational policy response, regardless of how long the shortage lasts.
If the oil supply crunch turns out to be short-lived, lasting anywhere between three months and a year, the rupee will recover substantially once the import bill shrinks, he reasoned. If the shortage proves longer-lasting, defending the rupee artificially would only make things worse. “Trying to defend the rupee will continue to bleed the reserves until they are exhausted,” he warned.
Also Read: Rupee Nears 97 Per Dollar: Why RBI May Revisit The 2013 Crisis Playbook
Why NRI Deposit Schemes Won’t Work This Time
His comments arrive as calls grow louder for the central bank to attract foreign inflows, including through higher deposit rates for non-resident Indians. Panagariya pushed back sharply against such proposals.
“Nor would dollar-denominated bonds or high-interest dollar-denominated NRI deposits turn out to be more than a band-aid. Eventually, you will have to cross the 100-rupee-per-dollar psychological barrier,” he wrote.
He also flagged the cost. “Dollar-denominated bonds and high-interest NRI dollar deposits are costly instruments that pay significantly higher interest than the rate India earns on its own foreign-currency reserves. It is largely a transfer to rich NRIs,” he said.
During the currency crisis of 2013, triggered by the US Federal Reserve’s taper tantrum, the RBI had launched a scheme allowing banks to swap dollars raised through foreign currency non-resident deposits of three years and above into rupees at a concessional rate. With US interest rates considerably higher now, experts say such a scheme is not feasible this time.
2025 Is Not 2013
Panagariya sought to temper fears by drawing a distinction between India’s current macroeconomic position and where it stood over a decade ago. Inflation was running in double digits in 2013. That is not the case today.
“Thanks to your prudent monetary management, that is not the case now. Therefore, the economy is well-positioned to absorb some inflationary pressure that will accompany the depreciation,” he wrote.
CPI-based retail inflation did edge up to 3.48 per cent in April, but remained below the RBI’s 4 per cent target. However, that projection may be revised upward at the next monetary policy meeting in June, after pump prices of petrol and diesel were hiked in May following a sharp rise in crude oil prices linked to the ongoing West Asia conflict.
Also Read: Rupee Hits Record Low, But RBI May Avoid Aggressive Rate Hikes
