RBI’s Strategy Focuses on Market Environment, Not Fixed Rupee Rate, According to Official

Finance Minister Nirmala Sitharaman addressed the Bloomberg New Economy Forum in New Delhi on October 13, stating that the Reserve Bank of India's chief objective is to nurture a well‑functioning foreign‑exchange market rather than prop up a predetermined rupee level. She explained that the RBI’s regulatory actions are aimed at reducing swings in the forex market caused by overseas developments.

The minister cited recent RBI steps, including a special dollar‑liquidity facility for state‑run oil marketing companies, stricter guidelines for re‑booking cancelled foreign‑exchange derivative contracts, and a reduction of the exposure limit for certain derivative transactions from $100 million to $5 million. These initiatives restored confidence among market participants, lifting the rupee to about 94.50 per dollar.

Sitharaman underscored that policymakers are concentrating on maintaining fiscal discipline and ample foreign‑exchange reserves to support a strong macroeconomic base. She noted that the majority of the rupee’s recent weakness stems from external challenges beyond India’s direct influence. "In the past 18 months the rupee has seen a sharp decline, and we have taken measures to address it," she said, adding that most of the pressure is foreign‑originated.

During early trade on Tuesday, the rupee gained 77 paise against the U.S. dollar, moving to 95.05. The minister concluded that the RBI will remain vigilant and, if required, will take additional steps to curb any market turbulence.