Reserve Bank of India Governor Sanjay Malhotra on Friday reiterated that the central bank does not operate with any predetermined band for the rupee and allows the currency to move freely based on market forces. His comments come amid heightened scrutiny as the rupee briefly breached the 90-per-dollar mark and continues to trade near that level.
Addressing reporters after the monetary policy announcement, Malhotra highlighted the RBI’s long-standing approach to currency management. "We don't target any price levels or any bands. We allow the markets to determine the prices. We believe that markets, especially in the long run, are very efficient. It's a very deep market," he said, responding to concerns over the rupee’s recent depreciation.
While acknowledging that exchange-rate fluctuations are inevitable, he emphasised that the central bank steps in only to curb extreme swings. "And that is what we will continue to endeavour," he noted, adding that the RBI’s effort has consistently been to reduce any abnormal or excessive volatility in the forex market.
Reiterating this stance later, he said the central bank simply lets “the rupee find its correct position, correct level.”
FX swap not aimed at supporting rupee
In the latest policy review, the RBI announced three-year USD/INR buy-sell swaps worth $5 billion to be undertaken this month. Clarifying the objective, Malhotra said it was purely a liquidity operation. "It is a liquidity measure. It is not to support the rupee," he stressed.
He further noted that the central bank’s inflation projections already incorporate the rupee’s prevailing levels. “RBI has factored in rupee at current levels in inflation estimates,” he said.
Source Name : Economic Times