New Delhi: The Reserve Bank of India (RBI) is expected to continue deploying measures to limit excessive volatility in the foreign exchange market as the rupee faces pressure from global developments, Finance Minister Nirmala Sitharaman said on Tuesday.
Speaking at the Bloomberg New Economy Forum here, the minister said the central bank’s priority was to ensure orderly market conditions rather than defend a specific exchange rate.
“The RBI is making significant efforts through its regulatory tools to ensure stability in the rupee. They are not trying to fix the rupee at any particular level,” she said.
“My understanding is that these efforts will continue,” adds FM Sitharaman.
Her statement comes days after the central bank unveiled a package of measures aimed at calming currency markets following a slide in the Indian rupee.
Earlier in October, the central bank opened a special dollar liquidity window for state-owned oil marketing companies, tightened rules governing the rebooking of cancelled foreign-exchange derivative contracts and reduced the threshold for certain derivative transactions without underlying exposure from $100 million to $5 million.
However, the measures appeared to reassure markets, with the rupee strengthening to close at 95.78 per dollar on Monday.
FM Sitharaman said policymakers remained focused on maintaining strong macroeconomic fundamentals through fiscal discipline and adequate foreign exchange reserves, arguing that much of the recent weakness in the currency stemmed from factors beyond India’s control.
“The depreciation of the rupee over the last one-and-a-half years has been significant and measures have been taken,” she said.
“But several factors contribute to it, and I believe most of them arise from challenges outside the country,” according to her.
On Tuesday, the rupee appreciated by 77 paise to 95.05 in early trading hours against the American currency.
While reiterating confidence in India’s economic fundamentals, the minister said the central bank was likely to remain vigilant and take additional steps if necessary to prevent disruptive movements in the currency market.