The pencil-thin 23-year-old, who opened his campaign with a stunning 61, struggled with an outward 37 but charged home with an eagle and two birdies on his home course, the Delhi Golf Club.
His two-day total of 14-under-par 130 kept him ahead of Bangladeshi star Siddikur Rahman (67), Mithun Perera of Sri Lanka (68) and Australia's Unho Park (65) in the US$300,000 Asian Tour event sponsored by Steel Authority of India Limited and State Bank of India.
Switzerland's Martin Rominger charged into contention with a brilliant 63 to lie five shots back while two-time champion Anirban Lahiri of India kept himself in the hunt with a bogey-free 66 to lie six back with two rounds remaining.
Khan, the reigning Indian PGTI number one, was happy he maintained a healthy lead over the chasing pack. "It was a really good comeback," said Khan, who lost to Lahiri in a play-off last year.
"I didn't hit the ball well and I was really struggling. But I managed to hole two or three putts which was important. I made eagle on the first from a good putt from 25 feet and had another good birdie on seven from 25 feet. It was all because of my putting."
After finishing 40th on the Asian Tour's Order of Merit last season to earn full playing rights in 2014, Khan is eager to get his year off on a winning note on course which he knows like the back of his hand.
"I was not comfortable with my swing. Even at the range, I wanted to hit a few more balls but I didn't have time. It's okay, it's nothing serious. Just need to make sure I find more greens and hole more putts in the next two days," he said.
Siddikur, who qualified to represent Team Asia in the inaugural EurAsia Cup presented by DRB-HICOM against Europe in Malaysia next month, shot a second straight 67 to give himself another chance of winning at the fabled Delhi venue following his triumph at the Hero Indian Open in November.
"Another five under today, I'm happy. It's good, that's my target every day. I'm especially happy with my putting as I struggled a bit yesterday," said Siddikur, the lone Bangladeshi winner on the region's premier Tour.
"I just want to follow what I've done in the first two days. If I can continue doing that, I think I can win. During the off season, I did my fitness with my local trainer and also did my yoga. I'm very serious on that. It's given me more flexibility and mobility. When I wake up, I don't feel tightness in my body which is good," he added.
Like the second round leader, Perera is also chasing a maiden Asian Tour victory and three closing birdies kept him hot on Khan's heels. He was annoyed at himself for dropping shots on the second and 15th holes from the middle of the fairway but took his anger out with a storming finish, holing putts of seven feet, three feet and one foot in the last three holes.
"I had bad bogeys but I had a good finish. At least I have a chance and I'll try to keep doing well," said Perera. "Rashid is a really good player, he's number one on the PGTI and this is his home course. I have to play good to give him a fight. We can't expect him to play bad here."
A relaxed Park nailed seven birdies to charge into contention. Winless after playing in Asia for over a decade, the 40-year-old fancies his chances at a venue which he has done well in the past.
"I've had a lot of my best finishes around here. A lot of top-10s but a lot of bad rounds too. If you're not hitting it good, this course just eats you up," said Park. "Everything has been going good the first two days. It's a matter of whether it can hold up or not."
Lahiri, who is also in Team Asia for the EurAsia Cup after finishing third on the Order of Merit, conceded his hopes of achieving an historic third straight win would depend largely on the runaway leader.
"I can only control what I can do," said Lahiri. "At least I've given myself a chance. I need to stay in this form for the next two days if I am to challenge for the title. I'm happy as least I can have a sniff," he said.
Twelve players will return on Friday morning, 8am to complete their second rounds after play was suspended due to fading light at 6.25pm.
Australian are well placed with Unho Park tied for second position and Scott Barr in a share of 7th.
Scores after round 2 of the SAIL - SBI Open being played at the par 72, 6,928 Yards Delhi GC course (a- denotes amateur):
130 - Rashid KHAN (IND) 61-69.
134 - Siddikur RAHMAN (BAN) 67-67, Unho PARK (AUS) 69-65, Mithun PERERA (SRI) 66-68.
135 - Martin ROMINGER (SUI) 72-63.
136 - Anirban LAHIRI (IND) 70-66, Digvijay SINGH (IND) 68-68.
137 - S.S.P CHOWRASIA (IND) 68-69, Scott BARR (AUS) 67-70, Akinori TANI (JPN) 66-71.
138 - Sanjay KUMAR (IND) 68-70, Steve LEWTON (ENG) 68-70, Mukesh KUMAR (IND) 70-68, Shamim KHAN (IND) 68-70, Javi COLOMO (ESP) 71-67, George GANDRANATA (INA) 68-70.
139 - Anura ROHANA (SRI) 73-66.