As Rupee Slides, RBI Says No Intervention Required Yet

23 September 2011 - Which Way to Pay

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As Rupee Slides, RBI Says No Intervention Required Yet

As the Rupee falls to the lowest value in 28 months, the Reserve Bank of India has announced today that no intervention in the forex market is necessary at this time, although if it were to take any action it would be to limited to curbing volatility of markets. The deputy governor of the RBI, Subir Gokarn, said in an interview today that at the moment the bank does ‘not see any intervention from a rate targeting view point’ as such a move would ‘reflect a change in policy stance, which we are not doing at this point.’

Economists however think that the Reserve Bank should take action in the forex market in India in order to put a stop to the falling value of the rupee. The sharp decline of the rupee has also become an issue with policymakers as it could hike inflation rates as India’s crude oil is all imported and paid for in US dollars. As yesterday saw the biggest one-day loss in nearly 3 years as the rupee dropped 2.5%. Gokarn was clear in expressing the bank’s intentions should an intervention be necessary, ‘if we do intervene at all, it would be with a very narrow perspective’ to clam the volatile market ‘but nothing beyond that.’

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