Rupee Fall Not a Worry, Says RBI Governor Malhotra
He cited the example of the rupee’s appreciation earlier this year when it reversed from nearly 88 in February to below 84 within three months
Mumbai: The Reserve Bank of India (RBI) doesn’t target any specific exchange rate level and relies on market forces to determine the rupee value, Governor Sanjay Malhotra said on Friday adding that its interventions are aimed only to control excessive volatility. His statement comes at a time when the rupee slipped below the psychologically critical 90 per dollar level on Wednesday extending an eight-month decline as firm US dollar, uncertainty around the Indo-US trade deal and continued demand for dollars from importers and foreign investors weighed on the domestic unit.“Our stated policy has always been that we allow the markets to determine. I mean we don't target price levels or any bands. We allow the markets to determine prices. We believe that the markets, in the long run especially, are very efficient,” he told reporters at the post Monetary Policy press conference, adding that the rupee is part of a “very deep market”.
He cited the example of the rupee’s appreciation earlier this year when it reversed from nearly 88 in February to below 84 within three months. “These fluctuations happen. Our effort is to reduce abnormal volatility. We are having sufficient reserves. The current account is manageable at about one percent or so, and given the strong fundamentals of our country, we should get good capital flows as well going forward.” He added that the recent $ 5-billion rupee-swap is purely a liquidity tool and not an attempt to bolster the currency.
The Indian rupee ended at 89.98/99 to a dollar level on Friday, an all-time closing low, after opening at 89.85/86 level. The rupee rose to an intra-day high of 89.6950 level and slipped sharply to 90.0850 low, after the RBI announced a three year buy and sell swap for $ 5 billion as part of liquidity measures.
The RBI at its Monetary Policy Committee meeting on Friday lowered its key repo rate by 25 bps to 5.25 per cent during its December 2025 meeting. The central bank also announced open market operations worth Rs one lakh crore to buy bonds this month, along with an additional $ 5 billion in forex swaps to inject liquidity into the banking system and speed up the transmission of lower rates. At the current average exchange rate this implies an injection of around Rs 45000 crore.
On a question on impact of US tariffs of 50 per cent on Indian exports, Malhotra said the tariffs imposed on Indian exports are an opportunity for the sector. He said that the impact of tariffs has been ‘minimal’. “It's a minimal impact. It's not a very high impact because ours is mostly a domestic demand driven economy.”
“I think this is an opportunity for us. Exporters have already started looking out, improving, not only, their productivity but diversifying, etc. We should be able to come out of this stronger going forward,” he said.
India's exports to the United States, its biggest overseas market, have declined significantly due to substantial increases in tariffs. During the period from May to October 2025, exports dropped by 28.5 per cent, decreasing from $8.83 billion to $6.31 billion.
