RBI Ready To Act To Maintain Stability In Forex Market, Says Governor

Reserve Bank of India Governor Sanjay Malhotra said the central bank will intervene whenever necessary to maintain orderly conditions in the foreign exchange market and prevent speculative pressure on the rupee.

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In an interview with Mint, Malhotra said the RBI does not target any specific exchange rate level but remains focused on ensuring smooth price discovery in the currency market.

The governor’s remarks come at a time when the rupee has weakened sharply against the U.S. dollar following heightened tensions in West Asia and sustained pressure from rising crude oil prices and foreign fund outflows.

According to Malhotra, the rupee may currently be undervalued after depreciating around 6% since the conflict in West Asia intensified on February 28.

He said the recent fall in the Indian currency could make it appear undervalued in both nominal terms and on the basis of the real effective exchange rate (REER), which measures a currency against a basket of trading partner currencies adjusted for inflation.

RBI Highlights Strong Reserve Position

The RBI governor said the central bank has adequate policy tools to deal with volatility in the currency market.

India’s foreign exchange reserves remain close to $700 billion, providing sufficient capacity to manage excessive fluctuations if required.

Malhotra stated that the RBI would continue monitoring market conditions closely and intervene in cases where speculative activity leads to disorderly movements in the rupee.

The rupee has remained under pressure in recent weeks as elevated crude oil prices increased concerns around India’s import bill and external balances. India imports a significant portion of its crude oil requirement, making the currency sensitive to changes in global energy markets.

Focus Remains On Inflation And External Stability

The governor also highlighted the need to improve both the current account and capital account position over time.

He said measures aimed at reducing the current account deficit are already being pursued, while additional efforts may be required to strengthen capital inflows.

Malhotra noted that the RBI’s primary responsibility continues to be inflation management. He added that monetary policy decisions would continue to balance inflation and growth depending on evolving economic conditions.

The comments come ahead of the RBI’s upcoming monetary policy meeting scheduled for early June, where market participants will closely track the central bank’s assessment of inflation, liquidity conditions and currency stability.

Investors are also expected to monitor developments in global crude oil markets and geopolitical conditions in West Asia, which continue to influence currency movements across emerging markets, including India.