The Reserve Bank of India (RBI) is likely to continue taking measures to mitigate volatility in the foreign exchange market, Finance Minister Nirmala Sitharaman said on Tuesday.
“The rupee has reached a low and the RBI is making a lot of efforts through its regulatory powers to make sure that the rupee stays stable. They are not trying to fix the rupee,” Sitharaman said at the Bloomberg New Economy Forum in New Delhi. “These efforts from the RBI, as I understand, will continue.”
“I am sure there are efforts that the RBI would take further to make sure that the rupee doesn’t become too volatile,” the minister added.
The RBI rolled out a slew of measures on Saturday to manage volatility in the foreign exchange market, as the rupee closed at 96.71 against the dollar on Friday. The regulator opened a special dollar window for three state-owned oil marketing companies (OMCs) and imposed restrictions on rebooking cancelled foreign exchange derivative contracts. It also lowered the threshold for carrying out foreign exchange derivative transactions without establishing an underlying exposure to $5 million from $100 million.
Following the measures announced over the weekend, the rupee appreciated, closing at 95.78 per dollar on Monday.
According to the finance minister, policymakers are ensuring that India’s economic fundamentals remain sound through fiscal discipline and adequate foreign exchange reserves, but the currency’s depreciation stems from external challenges.
“I think the depreciation of the rupee, as it is happening over the last one and a half years, is very significant and measures have been taken. But many different factors add to it. I would believe most of it are because of the challenges outside,” Sitharaman said.
The Indian currency has come under particular pressure since the onset of the West Asia conflict in late February, depreciating by around 6 per cent.
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