How RBI can address rupee volatility

The Indian rupee is on a downward trend. It logged its fifth straight monthly fall in February, weighed down by foreign portfolio outflows and increased hedging in the onshore and the non-deliverable forward market. Persistent outflows from the stock markets have also hit the rupee. Foreign investors have net sold over $14 billion worth of Indian stocks so far in 2025, playing a role in making the rupee one of Asia's worst-performing currencies.

The Reserve Bank of India has a mandate to address the volatility of the Rupee. It has intervened in the markets periodically to slow down the slide. It has many tools to do so. On February 28, the RBI conducted a dollar-rupee buy/sell swap auction for $10 billion with a three-year tenor. The auction was oversubscribed 1.62 times. A Reuters poll shows that analysts expect the rupee to weaken to 87.63 in six months. It suggests that sluggish economic growth, uncertainty over U.S. President Donald Trump's tariff, and the rising possibility of a global trade war have hit foreign investors' demand for Indian financial assets.

What can we expect the RBI to do? How does the RBI decide to intervene in the market? How is this volatility different from the volatile periods we’ve seen before? What’s the greater impact of this on our economy?

Guest: Smita Roy Trivedi, Associate Professor, National Institute of Bank Management, Pune (the views expressed are strictly personal)

Host: Nivedita V

Edited by Jude Francis Weston

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