RBI Will Monitor Forex Markets for Sharp Volatility, Says Governor Sanjay Malhotra

The Reserve Bank of India has reaffirmed its approach to managing currency movements, emphasising stability without fixing any specific exchange rate.  

The statement comes at a time when the rupee has been under pressure due to global factors and rising crude oil prices. 

RBI Stance and Market Intervention 

RBI Governor Sanjay Malhotra stated that the central bank will continue to act against sharp and disruptive currency movements while maintaining a market-driven exchange rate system. 

He clarified that intervention in the foreign exchange market is intended to address volatility and not to defend any particular level, noting that exchange rates remain “market-determined”. 

Over the past month, the central bank has actively intervened in both the spot market and offshore non-deliverable forwards (NDF) segment.  
 

These actions were taken as the rupee weakened significantly, driven by elevated Brent crude prices and global uncertainties. 

Rupee Movement and Forex Reserves Impact 

The rupee recently touched an all-time low, briefly crossing the ₹95 per dollar mark on March 30, despite earlier measures such as directives on net open positions, which had limited impact. 

At the same time, India’s foreign exchange reserves have declined, falling from nearly $730 billion at the beginning of March to $688 billion as of March 27.  

Following subsequent interventions and market adjustments, the rupee recovered slightly and was trading at ₹92.61 per dollar at 13:50 IST, compared to ₹93 in the previous session. 

Policy Measures and Market Response 

To address speculative pressures, the RBI introduced stricter norms in the offshore NDF market. This led to banks unwinding excessive speculative positions, resulting in a recalibration of offshore exposure and reduced volatility in the currency market. 

Earlier in the day, the RBI maintained the repo rate at 5.25% for the second consecutive policy meeting. The central bank also retained its ‘neutral’ stance, indicating a balanced approach amid evolving macroeconomic conditions. 

Read More: RBI Plans Board Governance Reforms to Shift Focus Toward Policy Oversight! 

Conclusion 

With continued intervention and a focus on stability rather than control, the RBI is navigating currency pressures while allowing market forces to determine exchange rate movements. 

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