RBI Committed to Stabilizing Forex Market Amid Geopolitical Tensions
RBI to do 'whatever is required' to ensure orderly forex market: Report
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Reserve Bank of India (RBI) Governor Sanjay Malhotra stated that the central bank is ready to take necessary actions to maintain stability in the foreign exchange market due to increased volatility from the ongoing conflict in West Asia. The RBI holds nearly $700 billion in reserves to manage speculative pressures on the rupee.
- 01RBI Governor Sanjay Malhotra emphasized that the central bank will intervene if speculative pressures on the rupee intensify.
- 02The rupee has depreciated by approximately 6% since the onset of the conflict in West Asia on February 28.
- 03Malhotra noted that the recent depreciation may have led to the rupee being undervalued in both nominal and real effective exchange rate terms.
- 04The RBI has nearly $700 billion in foreign exchange reserves to mitigate undue speculative movements.
- 05Malhotra reaffirmed that the RBI's primary focus remains on managing inflation while supporting growth when possible.
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In light of the heightened volatility in the foreign exchange market due to the ongoing conflict in West Asia, Reserve Bank of India (RBI) Governor Sanjay Malhotra has declared the central bank's readiness to take necessary actions to ensure stability. He stated that while the RBI does not aim for a specific rupee level, it will intervene if speculative pressures escalate. The rupee has weakened significantly, depreciating by about 6% since February 28, 2023. Malhotra suggested that this decline could have rendered the rupee undervalued, both nominally and in terms of the real effective exchange rate (REER). He also expressed confidence that the rupee might appreciate once geopolitical tensions subside. Furthermore, he highlighted the importance of addressing India's external balances, particularly in reducing the current account deficit and improving the capital account. On monetary policy, Malhotra reiterated that the RBI's primary mandate is inflation management, stating that if conditions allow, the central bank supports growth initiatives.
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The RBI's actions to stabilize the forex market could influence the economic landscape in India, particularly affecting import costs and inflation.
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