Why in the News?
The World Bank praised the Reserve Bank of India’s exchange rate management, calling it consistent and sensible amid volatility caused by the West Asia conflict.
Key Highlights
- World Bank said RBI is managing short term volatility effectively
- RBI not targeting any fixed rupee level
- Focus is on smoothening excessive fluctuations
- Policy helps reduce financial instability during global shocks
Rupee Volatility Background
- Rupee crossed:
- 90 per dollar (Dec 2025)
- 92 to 95 per dollar (March 2026)
- Reasons:
- West Asia conflict
- Foreign investment outflows
- Global risk aversion
Foreign Portfolio Investors sold:
- $12.7 billion Indian equities in March 2026
- Highest ever monthly outflow
RBI Strategy
RBI intervened through:
- Foreign currency sales
- Spot market intervention
- Forward market operations
Objective:
- Control volatility
- Avoid abrupt currency movements
| [2019] Which one of the following is not the most likely measure the Government/RBI takes to stop the slide of Indian rupee? (a) Curbing imports of non-essential goods and promoting exports (b) Encouraging Indian borrowers to issue rupee-denominated Masala Bonds (c) Easing conditions relating to external commercial borrowing (d) Following an expansionary monetary policy |
