Reserve Bank of India (RBI) Governor Sanjay Malhotra on Friday made it clear that the central bank does not aim for any particular price level or band for the Indian rupee. He stated that the RBI allows the currency to discover its own "correct" value in the market, even as it trades near the 90 mark against the US dollar.
RBI's Stance on Rupee Volatility and Market Efficiency
Addressing the media after the monetary policy announcement, Governor Malhotra emphasized the RBI's long-standing philosophy. "We don't target any price levels or any bands. We allow the markets to determine the prices," he said. He expressed confidence in market efficiency, especially over the long term, describing the forex market as "very deep."
He acknowledged that currency fluctuations are a constant feature, and the RBI's intervention is strictly limited to curbing "abnormal or excessive volatility." The goal is not to steer the rupee to a predetermined level but to ensure orderly market conditions.
Clarifying the Purpose of the USD/INR Swap Move
This clarification comes in the wake of the RBI's recent announcement of a three-year USD/INR Buy-Sell swap worth USD 5 billion this month. When questioned if this measure was intended to slow the rupee's depreciation, Governor Malhotra was unequivocal.
"It is a liquidity measure. It is not to support the rupee," he stated. He reiterated the central bank's position of not targeting any specific exchange rate, allowing the currency to find its "correct position, correct level" based on fundamental market forces.
Strong Forex Reserves and Manageable External Position
Governor Malhotra provided reassurance about India's external sector strength. He revealed that the country's foreign exchange reserves remain robust at USD 686.2 billion as of November 28, 2025. This substantial buffer provides import cover for over 11 months.
He described the current account deficit as "manageable" and expressed optimism that strong economic fundamentals would attract better capital inflows in the future. However, he presented data showing a net outflow of USD 0.7 billion in foreign portfolio investments for 2025-26 (April to December 3), primarily due to continued selling in equities. Flows from external commercial borrowings and non-resident deposits have also softened compared to the previous year.
On the domestic policy front, following the 25 basis points cut in the policy repo rate, the RBI's immediate focus is now on ensuring this reduction is transmitted effectively across the banking system to benefit the broader economy.
