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Informist, Wednesday, Oct. 7, 2026

 

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--RBI Malhotra: On rupee: "Markets can be quite irrational in the short term" 
--RBI Malhotra: Markets can be quite irrational in short-term 
--RBI Malhotra: Rupee is not overvalued, it is undervalued 
--RBI Malhotra: We will ensure that rupee stabilises, finds correct value 
--RBI Malhotra: Will ensure no excessive rupee volatility 
--RBI Malhotra: We will ensure there is no excessive volatility in FX market 
--RBI Malhotra: Trust current account will turn to surplus from defict soon 
--RBI Malhotra: Pressure on current account temporary, to ease sooner, later 

 

MUMBAI – "Markets can be quite irrational in the short run," said Reserve Bank of India Governor Sanjay Malhotra while answering a question on the rupee's depreciation despite the central bank mobilising large inflows through its recent measures. "Markets can be quite irrational in the short run. They can be," he said at the post-policy press conference. "It's only in the long run that they are able to find the right value." 

 

The central bank on Jun. 8 announced a host of measures to attract foreign capital, including concessional foreign exchange swap facilities for banks' foreign currency non-resident deposits and public sector borrowings, expanded routes for government securities, and changes to export realisation norms. 

 

Nearly 93% of the inflows came from FCNR(B) deposits at $132.98 billion, which closed on Aug. 31. Banks have raised $5.32 billion through overseas foreign currency borrowings during Jun. 8 to Sept. 18. External commercial borrowings by public-sector undertakings were $5.30 billion Jun. 8 to Sept. 18. 

 

Despite this, since Jun. 8, the rupee has depreciated over 1% against the dollar. On Wednesday, the Indian unit hit a low of 96.8500 a dollar, not too far from its record low of 96.9600, thanks to a jump in crude oil prices and persistent foreign portfolio outflows. 

 

The governor said that "by a number of estimates, including the REER (real effective exchange rate), the rupee is not overvalued, it may be undervalued."

 

The rupee's real effective exchange rate index was at 92.00 in August, indicating that the Indian currency is undervalued by almost 8%. 

 

Malhotra also said that the RBI would ensure that the rupee stabilises and finds its correct value, and at the same time ensure that there is no excessive volatility.

 

Further, talking about the external sector, Malhotra called the current global headwinds "temporary", adding that sooner than later, the external sector will be stronger. "...we have complete faith that our BoP (balance of payments) will soon be in the deficit or surplus, as it has been in previous years. And we have all the forex reserves, which we will use to give them back," he said. 

 

India's current account deficit widened to $11.2 billion in Apr-Jul, nearly double the $6.6 billion recorded in the same period last year. For Apr-Jul, overall balance of payments recorded a surplus of $12.7 billion, sharply higher then $4.8 billion in the same period a year ago, primarily owing to the RBI's measures to attract capital inflows.  End

 

US$1 = INR 96.75

 

Reported by Pratiksha

Edited by Akul Nishant Akhoury

 

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