RBI Governor Sanjay Malhotra said the central bank’s recent forex measures, including a special dollar window for oil marketing companies and tighter derivative rules, are aimed at ensuring orderly currency-market movement and curbing excessive speculative activity.
New Delhi, October 14 — Reserve Bank of India Governor Sanjay Malhotra said the central bank’s recent measures in the foreign exchange market are intended to ensure orderly movement of the rupee and prevent excessive speculative activity.
The RBI recently tightened rules governing foreign-exchange derivative transactions and introduced a 20% reserve requirement for dollar purchases by banks. It also created a special dollar window for three state-owned oil marketing companies, which are among the largest dollar buyers because of their crude oil import requirements.
Malhotra said the special window was introduced after assessing current market conditions. The rupee has been appreciating against the US dollar since Friday following the recent measures.
The Governor said the RBI’s objective is not to defend any particular level or trading band for the rupee. Instead, the central bank is focused on maintaining orderly market conditions and preventing one-sided speculative positions from distorting the currency’s movement.
Among the measures, the RBI has disallowed the rebooking of cancelled forex derivative contracts, which Malhotra said would help reduce speculative bets. The forex reserve requirement was also introduced after the central bank observed excessive speculative positioning on the buy side.
Malhotra stressed that the primary role of the forex market is to meet and hedge genuine foreign exchange requirements. Unlike equity markets, where participants can take a view on price movements, forex transactions are primarily meant to address underlying currency exposures.
He added that the central bank had observed excessive volatility and one-sided positioning that was preventing market forces from determining the rupee’s appropriate value, prompting the RBI to step in.
On the domestic economy, Malhotra said growth remains strong across several areas. Banks are well-capitalised, profitable and expanding, while corporate earnings are improving and early signs of fresh investment are visible.
He also said household balance sheets remain resilient despite higher leverage, and described India’s broader macroeconomic and financial institutions as robust.
However, the Governor cautioned that the RBI continues to monitor evolving geopolitical risks and their potential impact on the Indian economy.
