RBI Official Confirms Temporary Measures, Emphasizes Long-Term Goal of Internationalizing the Rupee

Reserve Bank Deputy Governor Affirms Commitment to Rupee's Internationalisation

Reserve Bank Deputy Governor T Rabi Sankar on Wednesday stated that the measures taken on the rupee front were temporary and reaffirmed the central bank's commitment to the currency's internationalisation in the long term.

The senior official seemed non-committal about when the central bank would completely roll back the measures undertaken on March 30 and April 1 this year, after noticing excessive speculation in the currency market, which was creating an artificial scarcity for the US dollar. This speculation had led to a large volatility in the market, prompting the RBI to take temporary measures.

It is worth noting that earlier this week, the RBI partially rolled back a part of the April 1 measures on rupee derivatives, allowing authorised dealers to resume offering non-deliverable derivative contracts, involving INR to resident or non-resident users.

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When asked about the timelines by when the $100 million cap on the net open positions will be lifted, Sankar stated that the RBI is committed to having one single global market for rupee-dollar, and also for internationalisation of the rupee over the long term.

The RBI's actions were taken to deal with a temporary event and not due to appreciation or depreciation in the domestic currency against the greenback. According to Sankar, in the future, the currency's value will be dependent on market forces, which are driven by demand-supply dynamics. The central bank comes in only when it sees excessive or disruptive volatility in the market.

To a question on any further relief measures being planned, given that the geopolitical tensions are continuing, Sankar stated that the RBI will always take steps that are necessary to ensure that it meets its goals, that markets function well, and to ensure that the economy functions well.

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