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Informist, Wednesday, Apr. 8, 2026

 

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--RBI Malhotra: FX measures cannot be compared to earlier measures 
--RBI Malhotra: FX measures not a structural change 
--RBI Malhotra: Have sufficient FX reserves, not a matter of concern 
--RBI Malhotra: FX measures not permanent, structural 
--RBI Sankar: Took FX mkt curbs on artificial drying up of dlr supply in mkt 
--RBI Malhotra: Recent FX steps are not measures that will remain forever 
--RBI Malhotra: Took FX steps on excessive volatility, positions' built up 
--RBI Malhotra: FX measures have to be taken in unusual times 
--RBI Malhotra: Noticed arbitrage positions being built up in FX mkt in Mar 
--RBI Malhotra: Noticed heightened volatility in FX mkt in March 
--RBI Malhotra: FX intervention targets undue volatility 
--RBI Malhotra: Intervention in FX market aimed at smoothening volatility

 

MUMBAI – The recent regulatory measures by the Reserve Bank of India in the foreign exchange segment are not permanent and stuctural, RBI Governor Sanjay Malhotra said Wednesday, adding that the steps were taken owing to the noticeably heightened volatility in the market and build-up of positions. 

 

"In the last few weeks of March, there was heightened volatility in the forex market. We saw that positions were being built up leading to arbitrage positions between the non-deliberable forward market and delieverable market," he said at the post-policy press conference. "In normal times, these linkages are important for efficient price discovery and that's why it has been our endevour to broaden and widen and make the market more liquid. But when there is excessive volatility, building up of positions, which is only increasing volatility and perhaps not helping in efficient price discovery, such measures are taken."

The RBI recently tightened its control over banks' foreign exchange positions. On Mar. 27, the RBI directed banks to ensure that net open rupee positions in the onshore market do not exceed $100 ‌million at the end of each business day, latest by Friday. It further doubled down on its support for the rupee and issued more directions on Apr. 1, prohibiting banks from offering non-deliverable derivative contracts using the rupee to resident or non-resident clients, effective immediately. The central bank also said that companies couldn't rebook cancelled forward contracts.

 

The governor said that the central bank continues to stand committed long term to the development, broadening and deepening of the foreign exchange market and to the internationalisation of the rupee. "So, obviously these are not measures that are going to be there for forever," he said. Malhotra further said that it would not be fair to compare the latest foreign exchange measures to the central bank's past measures to contain rupee volatility. 

 

RBI Deputy Governor T. Rabi Sankar added that the measures were also taken due to artificial drying up of dollar supply in the currency market. "These measures have to be seen in the context of this event, this episode, which was leading to disruptive volatility. More importantly, it was leading to an artificial drying up of supply in the market, which was affecting prices," Sankar said. "Although the transcations were arbitrage transactions, they were affecting the local prices. Our objective of doing this was to cool that phase down."

 

In March, the rupee had come under extreme downward pressure, hitting a record low of 95.2200 a dollar, due to a surge in crude oil prices and strong foreign portfolio outflows following the US and Israel's attack on Iran on Feb. 28. However, following the central bank's measures, the rupee has recovered over 2.5% from its record low. 

 

The governor said that India has sufficient foreign exchange reserves, with no concerns on that front. Earlier in the day, while detailing the monetary policy decision, Malhotra said the RBI's exchange rate policy remains unchanged. "Specifically, intervention in the foreign exchange market is aimed at smoothening excessive and disruptive volatility without targeting any specific level or band for the exchange rate," he said.

 

The RBI would judiciously contain excessive or disruptive volatility to ensure that self-fulfilling expectations do not exacerbate currency movements beyond what is warranted by fundamentals, he said.  End

 

US$1 = INR 92.58

 

Edited by Avishek Dutta

 

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