Mumbai (Maharashtra) [India], July 22 (ANI): The Reserve Bank of India will continue to engage with the foreign exchange market and ensure that the rupee finds its level in line with its fundamentals, said Governor Shaktikanta Das.
Speaking at the Bank of Baroda’s Annual Banking Conference in Mumbai on Friday, the Governor reiterated the central bank does not have any particular level of the rupee in mind, but it would like to ensure its orderly evolution and have zero tolerance for volatile and bumpy movements.
Notably, the Indian currency rupee this week slipped below the psychologically important level of 80 against the US dollar for the first time ever due to various reasons including widening trade deficit, strength in the US dollar, fund outflows and buoyed global crude oil prices. India’s trade deficit widened to USD 45.18 billion in April-June 2022 period as compared to USD 5.61 billion recorded in the corresponding period of last year.
The rupee depreciated 6-7 per cent so far in 2022.
“Due to the RBI actions, including measures to encourage inflows, the movements of the rupee have been relatively smooth and orderly. By eschewing sudden and volatile shifts, we have ensured that expectations remain anchored and the forex market functions in a stable and liquid manner,” Das said.
To reduce the dominance of the dollar, the RBI recently announced a mechanism to settle payments for international trade in rupees, especially for India’s exports. India’s forex reserves, in the six months since January 2022, have declined by over USD 40 billion.
On the overall economy, he said inflationary pressures are building up and external funding conditions are becoming tighter, posing financial stability challenges in emerging market economies.
“Overall, the global situation remains grim amidst fluid geopolitical situation while the war and the pandemic add to the forces of disintegration and fragmentation of the global economy,” he said.
In such an environment, the Indian economy, however, remains relatively better placed, drawing strength from its macroeconomic fundamentals, he opined.
Further, on banking, he said the world of banking is expected to be more collaborative as well as competitive going ahead, with newer players offering innovative financial products.
“Banks need to prepare themselves for facing the dynamic environment, while keeping their focus on appropriate business models, sustainability, stability, and consumer centrality,” he said in his concluding remarks. (ANI)
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