RBI governor Sanjay Malhotra.(PTI)AI Quick ReadMUMBAI: The Reserve Bank of India’s foreign exchange rate policy remains unchanged, governor Sanjay Malhotra said on Wednesday, commenting on the volatility of the rupee since the start of the West Asia war.
Malhotra said that despite stronger macroeconomic fundamentals, the Indian rupee’s depreciation in the previous financial year was more than the average of the previous years. Safe haven flows, he said, have exerted depreciation pressure on the currencies of major economies as the US dollar strengthened.
“...let me reiterate (something that) I have said many times. Our exchange rate policy remains unchanged,” said Malhotra. He said intervention in the foreign exchange market is aimed at smoothing excessive and disruptive volatility without targeting any specific level or price band for the exchange rate.
“This is consistent with our longstanding policy of exchange rates being market determined,” he said.
According to Malhotra, the RBI stands committed to this policy and would judiciously continue to contain excessive or disruptive volatility to ensure that self-fulfilling expectations do not exacerbate currency movements beyond what is warranted by fundamentals.
The Indian rupee traded at 92.52 against the US dollar at 10:35 am on Wednesday. The local currency fell 4.5% against the dollar since the war in West Asia began on 28 February, and 11% in FY26, hitting an all-time low of 95.1250 per dollar on 30 March.
The currency appreciated over the past few days after the central bank's 1 April announcement of a second set of measures to curb speculation.
The RBI targeted the rebooking of cancelled forex derivative contracts and tightened norms for related-party transactions. If a company or trader cancels a dollar hedge, they can no longer re-enter the same trade to benefit from price movements, limiting their ability to take directional bets under the guise of hedging.
Separately, banks have been barred from undertaking foreign exchange derivative contracts with related parties, as defined under the Indian Accounting Standard (Ind AS) 2.
On 27 March, the RBI said the net open positions of banks in the domestic market must be capped at $100 million at the end of each business day by 10 April.
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