The Reserve Bank of India (RBI) today said it will not intervene in the foreign exchange market to increase reserves, but will step in from time to time to check extreme volatility in rupee.
“ Whether we will intervene to increase the forex reserves, the answer is no,” RBI Governor D Subbarao said in reply to query on whether the central bank will intervene in the forex market to beef up forex reserves.
The RBI has a stated stance of intervening in the market only to check extreme volatility, he added.
In June this year, the rupee had hit a lifetime low of 57.32 but has since then appreciated to 51-levels a few weeks ago. However, the currency has again weakened to 53.80 versus the US dollar in recent times.
“We don’t believe that we should intervene to build up the reserves. If the reserves can be built up as a consequence of intervention to curb exchange rate volatility, that is an incidental by-product,” Subbarao told analysts at a customary post-policy conference call this afternoon.
The foreign exchange reserves fell by $502.4 million to $293.97 billion due to fall in the currency assets, according to Reserve Bank data released on September 28.