Reserve Bank of India (RBI) Governor Sanjay Malhotra on Thursday clarified that the central bank does not aim for any specific level of the rupee, attributing the recent depreciation of the domestic currency against the US dollar to heightened demand for the greenback.
Speaking at the VKRV Rao Memorial Lecture at the Delhi School of Economics, Malhotra said India’s foreign exchange reserves are “very good,” and there is no cause for concern regarding the external sector.
He emphasised that the RBI’s foremost priority remains maintaining financial stability, while also working to simplify regulations wherever possible, without compromising necessary safeguards.
On the topic of the rupee’s decline, the governor explained that trade factors, particularly US tariff issues, have contributed to the pressure. He expressed confidence that a “good trade deal” with the United States would ease strain on India’s current account.
Malhotra said, “We do not target any level. Why is the rupee depreciating? (It) is because of the demand... It's a financial instrument, and there is a demand for dollars, and if the demand for dollars goes up, the rupee depreciates; if the demand for rupee goes up, dollar comes down, then it appreciates.”
The rupee fell 23 paise to close at 88.71 (provisional) against the US dollar on Thursday, influenced by the broad strength of the American currency and diminishing expectations of a US Federal Reserve rate cut.
Forex traders noted that the dollar gained momentum, crossing the 100-mark after minutes from the Fed revealed most officials opposed a rate reduction in December, following the October cut.
On the banking sector, Malhotra observed that Indian banks are performing strongly and predicted that “very soon a few of them will be among the top 100 global lenders.”
Speaking at the VKRV Rao Memorial Lecture at the Delhi School of Economics, Malhotra said India’s foreign exchange reserves are “very good,” and there is no cause for concern regarding the external sector.
He emphasised that the RBI’s foremost priority remains maintaining financial stability, while also working to simplify regulations wherever possible, without compromising necessary safeguards.
On the topic of the rupee’s decline, the governor explained that trade factors, particularly US tariff issues, have contributed to the pressure. He expressed confidence that a “good trade deal” with the United States would ease strain on India’s current account.
Malhotra said, “We do not target any level. Why is the rupee depreciating? (It) is because of the demand... It's a financial instrument, and there is a demand for dollars, and if the demand for dollars goes up, the rupee depreciates; if the demand for rupee goes up, dollar comes down, then it appreciates.”
The rupee fell 23 paise to close at 88.71 (provisional) against the US dollar on Thursday, influenced by the broad strength of the American currency and diminishing expectations of a US Federal Reserve rate cut.
Forex traders noted that the dollar gained momentum, crossing the 100-mark after minutes from the Fed revealed most officials opposed a rate reduction in December, following the October cut.
On the banking sector, Malhotra observed that Indian banks are performing strongly and predicted that “very soon a few of them will be among the top 100 global lenders.”
