Reserve Bank Governor Sanjay Malhotra stated on Saturday that the value of the rupee with respect to the US dollar is determined by market forces, and the central bank is not concerned about the day-to-day fluctuation of the currency. Speaking to the media after a meeting between Finance Minister Nirmala Sitharaman and the Reserve Bank board, Malhotra emphasized that the central bank is focused on the medium to long-term value of the rupee.
“There is no predefined level or band for the rupee by the RBI. Our goal is to control excessive volatility, rather than monitor daily exchange rate movements,” he said in response to a question about the rupee’s depreciation. Malhotra also mentioned that a 5% depreciation of the rupee against the dollar can impact domestic inflation by 30-35 basis points.
He added that the RBI considers the current rupee-dollar rate when projecting growth and inflation for the upcoming financial year. Factors contributing to the rupee’s depreciation include global uncertainties and announcements by US President Donald Trump regarding tariffs.
Malhotra reassured that the RBI is prepared to provide ample liquidity in the banking system, utilizing various tools such as open market operations, forex swaps, and liquidity adjustment facilities. He also mentioned that a working group has been established to address issues related to crypto-assets, with a discussion paper on cryptocurrencies forthcoming.
The statement released by the RBI following the meeting highlighted discussions on the global and domestic economic situation, geopolitical challenges, and financial market volatility. The board also observed a minute of silence in memory of former Prime Minister Manmohan Singh, who was also a former Union Finance Minister and Governor of the Bank.
Finance Minister Sitharaman outlined the vision of the Union Budget 2025-26 during the meeting, emphasizing prudent fiscal management and growth-oriented policies aimed at achieving ‘Viksit Bharat.’ The board directors commended the Finance Minister’s budget and shared their insights.
A number of officials, including Deputy Governors and Secretaries from various departments, also attended the meeting. The RBI reiterated its commitment to managing liquidity efficiently and monitoring economic developments closely. The central bank remains vigilant in its efforts to maintain stability in the financial system and support economic growth.
