There's a very similar extension:
https://winscp.net/eng/docs/extension_archive_and_download

If you do not need the "archive" part, you can remove it from the extension code.

As I understand, you may create local unrar command using comandline interface. WinSCP is written on Delphi, so it will be very hard work to include unarchiver (such as 7-zip) to the codebase.
Also you may use Settings->Panels->Local Option "Use OS context menu" to unrar it manually

Hi

Is there a feature in WinSCP that can extract password protected rar files local ?
my idea was, to download a file that is password protected, then unzip it with winrar

Thanks!