No Fixed Target: RBI Focuses on Curbing Rupee Volatility
RBI Governor Sanjay Malhotra clarifies that the central bank is curbing Rupee volatility, not targeting a specific exchange rate level.
The Reserve Bank of India (RBI) has clarified that it is not chasing a specific number for the Indian Rupee's value against the US Dollar. Speaking at the NDTV World Summit 2026 in New Delhi on October 23, Governor Sanjay Malhotra emphasized that the central bank's priority is to ensure the foreign exchange market remains orderly and free from disruptive speculative activities.
Stability Over Specific Levels
Governor Malhotra stated that the RBI does not target a particular price level for the currency. Instead, the focus is on preventing market disruptions and managing RBI Rupee volatility to keep the financial environment stable. This position mirrors recent comments made by Union Finance Minister Nirmala Sitharaman on October 13, 2026, who noted that global uncertainties have driven the Rupee's depreciation and that the RBI's role is to smooth out volatility rather than fix a rate.
The War on Inflation
Beyond currency management, the Governor highlighted a steadfast commitment to price stability. Describing high inflation as a "tax on all citizens," Malhotra reaffirmed the RBI's mandate to keep inflation at 4%, within a tolerance band of plus or minus 2%.
To combat these inflationary pressures, the RBI took a decisive step during its October policy meeting by increasing the repo rate by 25 basis points, bringing it to 5.50%.
Strategic Measures to Stabilize the Market
To reduce the demand for dollars in the open market and curb speculation, the RBI has rolled out several aggressive regulatory measures:
- Special Dollar Window: Effective October 12, 2026, a dedicated window was opened for public sector oil marketing companies, including BPCL, HPCL, and Indian Oil.
- Forex Derivative Restrictions: To discourage speculative bets, Authorized Dealers (ADs) must now maintain a Foreign Exchange Risk Reserve (FERR) in cash with the RBI. This applies to INR derivative contracts exceeding a $2 million notional value, requiring a reserve of 20% of that amount.
- Liquidity Management: To absorb excess system liquidity, the minimum daily Cash Reserve Ratio (CRR) maintenance requirement for banks was hiked from 90% to 99% on October 16, 2026.
Currency Trends and Reserves
The Rupee has faced a turbulent year, swinging from levels near 91 per US dollar in March 2026 to crossing the 95 mark, before eventually stabilizing around 92.5. Market analysts suggest that the RBI's recent policy shifts have already yielded results, with the Rupee strengthening by 1.8% as of October 16, 2026.
While India's foreign exchange reserves hit a historic peak of $785.71 billion in the week ending September 4, 2026, they have since adjusted to approximately $726 billion as of October 9, 2026.