Mumbai: The Reserve Bank of India (RBI) will do “whatever it takes” to maintain orderly conditions in the foreign exchange market and curb excessive volatility, governor Sanjay Malhotra said on Friday while announcing the monetary policy decision.
Addressing concerns about sharp currency swings, Malhotra reiterated that the RBI does not target any specific exchange rate and allows the rupee to be determined by market forces.
“Our experience, however, suggests that it may sometimes witness movements, often caused by speculative pressures, especially in the wake of heightened uncertainty, that are not in sync with fundamentals and are disruptive of economic activity,” Malhotra said.
He stressed that while the RBI would not resist market-driven adjustments in the currency, it would intervene to prevent disorderly conditions and curb excessive volatility.
On Friday, the Indian rupee opened at 95.7250 against the US dollar but quickly rose to 95.4025 after the governor’s comments. On Thursday, it ended at 95.7925.
RBI’s reassurance comes amid a sharp decline in the Indian rupee in recent months. Since the US-Iran war began on 28 February, the Indian rupee has depreciated by over 5% to hit a record low of 96.8262 on 20 May. In 2025-26, the local unit plummeted by over 11%, according to Bloomberg data.
Malhotra said that India’s foreign exchange reserves provide a strong buffer against external shocks and that the central bank has a broad range of regulatory and market-based instruments to respond effectively as may be required.
He said India’s foreign exchange reserves remain a strong buffer against external shocks and that the RBI has a wide range of regulatory and market-based tools at its disposal to respond to evolving conditions.
India’s foreign exchange reserves stood at $682.3 billion as of 29 May, providing import cover of about 11 months, according to the governor’s statement. Before the outbreak of the US-Iran war, reserves were at $723 billion as of 20 February, RBI data showed.
“All the measures announced by the RBI governor were focused around increasing access to foreign exchange through increased foreign capital, fuelling long term growth support while also boosting foreign exchange reserves to deal with the increased currency volatility,” Vivek Iyer, partner and financial services risk leader at Grant Thornton Bharat.
On 25 May, the governor had told Mint in an interview that the Indian rupee may be undervalued.
“With the recent depreciation, it would be reasonable to think that rupee is not overvalued. If anything, one could argue that rupee has become undervalued, both in nominal as well as in REER (real effective exchange rate) terms,” Malhotra had said.
He had said the RBI does not target any specific exchange-rate level and would intervene only to curb abnormal and high volatility or undue speculation.
