Finance Minister Nirmala Sitharaman on Tuesday clarified that the rupee's value against the US dollar is market-determined with no target or specific band for the domestic currency. According to reports from PTI, Sitharaman stated in a written reply in the Rajya Sabha that the government closely tracks trends in key economic parameters, including exchange rate movements, along with their implications for economic growth and fiscal stability. These issues are discussed at various fora at various levels of the government. As per PTI, Sitharaman emphasized that the rupee's value is left to market forces, without any fixed target, level, or range, and the central bank keeps a continuous check on the currency market, stepping in only when volatility becomes excessive. The Finance Minister further clarified that the RBI monitors key developments across the globe which may have an impact on the USD-INR exchange rate, ensuring comprehensive oversight of currency movements.
On Tuesday, the rupee pared initial losses and settled 12 paise higher at 96.24 (provisional) against the US dollar, as reported by PTI. Traders attributed the recovery to RBI's intervention in the foreign exchange market. According to PTI, Sitharaman explained that the Reserve Bank of India regularly monitors the foreign exchange market and intervenes in situations of excess volatility, while also keeping track of major global developments that could influence the dollar-rupee rate. The central bank has rolled out several steps to draw in foreign exchange, which could help relieve pressure on the rupee. The Reserve Bank of India reported mobilization of over twenty billion dollars in foreign exchange reserves, with strong capital inflows enhancing the reserves position.
The RBI has implemented several measures to boost forex inflows and ease pressure on the INR. According to PTI, these include amendment to the External Commercial Borrowings (ECB) framework in February 2026 through expansion of eligible borrower and recognised lender base, rationalisation of borrowing limits and restrictions on average maturity period. On June 5, RBI announced a slew of measures to boost foreign capital inflow, including raising limits for investment by Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) in equity instruments without SEBI registration, and extending the same facility to all individual Persons Resident Outside India (PROIs) at par with NRIs and OCIs. Additionally, a facility of concessional forex swap has been announced to incentivise the ECB by Public Sector Undertakings and overseas foreign currency borrowings with a minimum maturity of three years raised by AD banks, wherein the concessional rate of the swap was fixed at 1.5 per cent per annum compounded semi-annually. The swap facility has already come into effect and will remain open till January 15, 2027. The window for realising export proceeds has also been brought back to nine months, reversing the earlier 15-month allowance.
As reported by PTI, Sitharaman noted that the depreciation of the INR has been influenced by several factors, notably reduced support from the capital account amidst rising crude oil prices in the wake of the conflict in the Middle East. She emphasized that while a depreciating domestic currency is likely to enhance export competitiveness, impacting the economy positively, it may also raise prices of imported goods. The impact of exchange rate movements on import bill, domestic inflation, cost of essential commodities, the MSME sector and common citizens cannot be isolated, she added. She further explained that imports are also determined by global supply-demand conditions, geopolitical developments, domestic demand, and factors such as global value chain integration necessitating imports of intermediate goods for production and exports. These factors, combined with international prices of imported goods, create complex dynamics that cannot be separated from exchange rate movements.
