RBI Prepares for Forex Market Intervention as Rupee Declines 6%
RBI signals intervention readiness as rupee seen ‘undervalued’ after 6% slide: Report
Image: Firstpost
The Reserve Bank of India (RBI) is ready to intervene in the foreign exchange market amid a 6% depreciation of the rupee, which is now considered undervalued. RBI Governor Sanjay Malhotra emphasized the focus on maintaining stability rather than targeting a specific exchange rate.
- 01The rupee has depreciated approximately 6% since February 28 due to escalating geopolitical tensions in West Asia.
- 02RBI Governor Sanjay Malhotra stated that the central bank does not target a fixed rupee level but aims to mitigate excessive volatility.
- 03The RBI possesses foreign exchange reserves nearing $700 billion, providing significant capacity to manage market disruptions.
- 04The central bank is also focused on reducing India's current account deficit and improving capital inflows for external stability.
- 05Inflation control remains the RBI's primary mandate, but growth-supportive measures may be considered if inflation allows.
Advertisement
In-Article Ad
The Reserve Bank of India (RBI) has indicated its readiness to intervene in the foreign exchange market as the rupee has depreciated by about 6% since February 28, when geopolitical tensions in West Asia escalated. RBI Governor Sanjay Malhotra noted that the rupee's decline has placed it in an undervalued position, both nominally and in terms of the real effective exchange rate (REER). While the RBI does not aim for a fixed exchange rate, it remains vigilant against excessive volatility that could destabilize the market. Malhotra emphasized the importance of maintaining orderly trading conditions and the central bank's capacity to address market disruptions, supported by foreign exchange reserves of nearly $700 billion. Furthermore, he highlighted ongoing efforts to reduce the current account deficit and improve capital inflows to ensure external stability. The RBI's balancing act involves managing inflation, which remains its core mandate, while also supporting growth when feasible.
Advertisement
In-Article Ad
The RBI's readiness to intervene could stabilize the rupee, affecting import costs and inflation.
Advertisement
In-Article Ad
Reader Poll
How do you feel about the RBI's readiness to intervene in the forex market?
Connecting to poll...
More about Reserve Bank of India
Key Economic Developments in India: Forex Reserves and US Secretary of State's Visit
Business Standard • May 25, 2026
RBI Committed to Stabilizing Forex Market Amid Geopolitical Tensions
Moneycontrol • May 25, 2026
RBI Governor Malhotra Suggests Rupee May Be Undervalued Amid Recent Decline
Forexlive • May 25, 2026
Read the original article
Visit the source for the complete story.