Placed fourth on the Rolex Rankings for the PGTI order of merit, Rashid played with a subtle change in techique as he totalled 10-under 134 to emerge frontrunner to retain his Player of the Year title.
Overnight leader Shubhankar Sharma had a round of three-under-69 to be just one shot clear of the 23-year-old Rashid at 11-under-133.
Chikkarangappa of Bangalore, who closed the day in third place at nine-under-135, continues to be another top contender for number one position in the 2014 Rankings.
Rashid (71-63), a two-time winner on the Asian Tour this year, followed up his sedate opening round of 71 with an incredible 63 to match the course record which was earlier jointly held by American Edward Fryatt and Arjun Atwal.
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"It's been a long time and I've forgotten the year... But these 'kids' are really doing well. I'm very proud that our young golfers such as Rashid, Chikkarangappa and Shubhankar are playing so well," Atwal, who carded an eagle and four birdies to jump eight places to be on tied sixth, said.
"I had a feeling that I would shoot a six or seven under today since I made some changes in my putting stroke after yesterday's round. These changes seemed to have worked for me as I converted some long putts in round two.
"It's great to equal the course record. I've always done well at RCGC, having won two amateur tournaments here," a confident Rashid said with two rounds left.
Rashid produced a hat-trick of birdies from the fourth to the sixth, landing it within six feet on two occasions.