The new RBI governor Sanjay Malhotra, in his first monetary policy stated that the Indian economy, though continuing to remain strong and resilient, also did not remain immune to the global headwinds, with the Indian Rupee coming under depreciation pressure in the recent months. With receding expectations on the size and pace of rate cuts in the US, the US dollar has strengthened and bond yields have hardened. Emerging Market Economies (EMEs) have witnessed large capital outflows, leading to sharp depreciation of their currencies and tightening of financial conditions.
At the Reserve Bank, we have been employing all tools at our disposal to face the multi-pronged challenges, he said. The Indian rupee (INR) depreciated by 3.2 per cent against the US dollar since November 6, 2024, the day the presidential election results were announced in the US, largely mirroring the 2.4 per cent appreciation in the dollar index during the same period, the central banker noted.
The new RBI chief further mentioned that the Reserve Bank’s exchange rate policy has remained consistent over the years. Our stated objective is to maintain orderliness and stability, without compromising market efficiency, he said. Accordingly, our interventions in the forex market focus on smoothening excessive and disruptive volatility rather than targeting any specific exchange rate level or band. The exchange rate of the Indian Rupee is determined by market forces, Governor noted. Investors were particularly looking for signals in this policy about rupee management strategies under the new chief given that INR is consistently plunging to fresh record lows. Rupee stayed almost unchanged at similar levels post policy decision to cut benchmark repo rate by 25 bps for the first time since 2020 an is quoting at Rs 87.44 per dollar.