Business & Economy
RBI Says Rupee May Be Undervalued
What does that mean for how far the currency can fall?
What does that mean for how far the currency can fall?
The RBI’s shift from defending the rupee to saying it may be undervalued highlights a broader effort to manage currency pressure without promising a fixed exchange rate. That matters because , , and reserve strength are all shaping how much room the central bank has to steady markets while keeping the rupee aligned with .
The governor’s comments were read by markets as a sign that the RBI may be more comfortable with a weaker than before, as long as the move is orderly. The policy implication is that the RBI may tolerate , while continuing to step in only when becomes disruptive or become excessive.
The inflows from and bond investment reinforced India’s alongside still-large . Market commentary at the time said the RBI was confident that the remained manageable, because reserve strength and fresh capital inflows reduced the risk of acute stress.
The RBI said more than $7 billion had come into after the , extending the inflow story beyond bank deposits. That move suggested foreign investors were responding to India’s , while also giving the RBI more room to manage without relying only on direct intervention.
Banks mobilized almost **$32 billion** in , a large foreign-currency funding source for the banking system. The milestone matters because FCNR(B) inflows add to India’s external buffer, help support reserves, and reduce pressure on the during periods of rupee weakness.
After policy changes introduced in June, foreign investors began channeling more money into Indian debt markets, including . Reuters and business coverage said more than $7 billion had flowed into since those changes, showing that the RBI and government were also using capital-market access to support the .
Malhotra also clarified that the RBI does not aim for any or specific rupee level. The central bank’s interventions are intended to curb excessive volatility, speculative pressure, and , not to defend a particular price for the currency.
In a Mint interview, RBI Governor Sanjay Malhotra said that after the recent depreciation, it would be reasonable to think the rupee was not overvalued. He added that one could argue it had become ****, both in and in terms, which marked a notable shift in the RBI’s public framing of the currency.
RBI data on the , or REER, showed the rupee had weakened enough to move below levels that had previously suggested it was . Media coverage of the RBI’s data said the REER had fallen to around 90.96 in April, its lowest since September 2013, which supported the view that the currency was no longer expensive in competitiveness-adjusted terms.