RBI Governor Pledges to Maintain Orderly Rupee Movements

RBI Vows to Maintain Orderly Conditions in Foreign Exchange Market

Mumbai: The Reserve Bank of India (RBI) has pledged to 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. However, the RBI has observed that the Indian rupee 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 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. The 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.

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According to Bloomberg data, the local unit plummeted by over 11% in 2025-26. 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.

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.

Vivek Iyer, partner and financial services risk leader at Grant Thornton Bharat, said, "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."

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