scorecardresearch
RBI Guv Shaktikanta Das clarifies on Rupee, calls it 'free floating currency'

RBI Guv Shaktikanta Das clarifies on Rupee, calls it 'free floating currency'

“Rupee is a freely floating currency and its exchange rate is market-determined, RBI doesn’t have any fixed exchange rate in mind. The RBI intervenes to curb excess volatility and anchoring expectations," Das said.

Das added that the movement of INR has been orderly compared to its Asian and emerging market economies (EME) counterparts Das added that the movement of INR has been orderly compared to its Asian and emerging market economies (EME) counterparts

 

Reserve Bank of India (RBI) Governor Shaktikanta Das said that the Indian Rupee (INR) is a free floating currency and that its exchange rate is determined by the market. Das was announcing the decision of the Monetary Policy Committee (MPC). 

“Rupee is a freely floating currency and its exchange rate is market-determined, RBI doesn’t have any fixed exchange rate in mind. The RBI intervenes to curb excess volatility and anchoring expectations," Das said while unveiling the MPC announcements. The Governor further mentioned that the banks’ overarching focus is to maintain macroeconomic stability and market confidence. 

Das added that the movement of INR has been orderly compared to its Asian and emerging market economies (EME) counterparts as it depreciated by 7.4 per cent while the US Dollar has appreciated by 14.5 per cent up to September 28 against a basket of major currencies. This, according to the RBI boss, has led to a turmoil in currency markets globally. 

He also went on to elaborate on how the unarrested rise in US Dollar impacted Indian forex reserves. Das said, “About 67 per cent of the decline in reserves during the current financial year is due to valuation changes arising from an appreciating US Dollar and higher bond yields. We remain confident of meeting our external financing requirements comfortably.”

The RBI Governor also highlighted a growth of $4.6 billion in foreign exchange reserves on balance of payments during the current financial year. He furthermore underlined, “India’s other external indicators, viz., external debt to GDP ratio; net international investment position to GDP ratio; ratio of short-term debt to reserves; and debt service ratio also indicate lower vulnerability as compared with most major EMEs. In fact, India’s external debt to GDP ratio is the lowest among major EMEs.”

Talking about what steps the RBI can take in the coming days, he noted that the central banks’ actions will be guided by “incoming data and evolving scenario” and not factor in conventional or textbook approach to policy making. He also mentioned, “Our actions have helped in engendering investor confidence as reflected in the return of capital inflows since July. Over the medium term, the primacy of price stability embedded in our flexible inflation targeting (FIT) framework provides the anchor for exchange rate stability.”

Also read: RBI hikes repo rate by 50 bps to 5.90%; home, car loans to be impacted

Also read: RBI lowers GDP growth projection to 7% for 2022-23

Also read: RBI keeps inflation projection for FY23 unchanged at 6.7% on upside risks to food prices

Published on: Sep 30, 2022, 11:23 AM IST
Posted by: Mehak Agarwal, Sep 30, 2022, 11:18 AM IST