India outlines forex intervention conditions

NEW DELHI - India’s central bank said Friday it was watching the rise of the rupee and would intervene if overseas capital inflows become volatile.

By (AFP)

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Published: Fri 15 Oct 2010, 6:34 PM

Last updated: Mon 6 Apr 2015, 11:42 AM

The Reserve Bank of India has not moved to stem the rise in the Indian rupee, which is at a 25-month-high against the dollar after rising seven percent since September.

Rupee movements in India are influenced by capital flows rather than trade flows. India has seen record capital fund inflows of over 22 billion dollars in the year into Indian equities.

“We are watching the exchange rate situation. Our policy is clear, we will intervene if flows are lumpy or volatile or if it disrupts the macro-economic situation,” bank governor Duvvuri Subbarao told reporters.

Subbarao, speaking in the northeastern city of Chandigarh, did not clarify whether or when the bank would intervene to reduce rupee volatility, which is worrying exporters, including software outsourcers.

India expects more dollar inflows into the country when its biggest-ever initial public offering of 3.5 billion dollars from state-run coal producer Coal India opens on Monday.

A decision to intervene is not simple for the RBI, as a strong rupee helps the bank battle rising inflation, its biggest challenge.

The cost of living index jumped to 8.62 percent for the month of September, data showed Friday, well above its projected rate of 6.0 percent for the fiscal year to March.

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