The Indian rupee is not overvalued and may, in fact, be undervalued after its recent slide, Reserve Bank of India Governor Sanjay Malhotra told business daily Mint. The comments come as the domestic currency fast approaches the psychologically-significant 100-per-US dollar mark amid the ongoing US-Iran war. The rupee has weakened more than 6% since the Iran war began, pushing up crude. The Indian currency has fallen to consecutive record lows, including an all-time low of 96.96 per dollar on Wednesday.
"With the recent depreciation, it would be reasonable to think that rupee is not overvalued. If anything, one could argue that rupee has become undervalued, both in nominal as well as in Reer (real effective exchange rate) terms," Malhotra told Mint. The Reserve Bank of India has transferred an all-time high dividend of Rs 2.86 lakh crore to the Centre amid the ongoing global headwinds. The record surplus transfer would cushion the government's finances at the start of financial year 2026-27, as the government gears up to tackle the challenge of elevated global energy prices and stabilise the depreciating rupee against the dollar.
The dividend transfer, though marking a new record, is at the lower end of analysts' estimates. In the preceding financial year, ended March 31, 2025, the central bank had transferred Rs 2.69 lakh crore to the government. This was preceded by a payout of Rs 2.11 lakh crore in FY24. Earlier last week, forex traders said the central bank will conduct a dollar/rupee buy/sell swap auction of $5 billion for a tenor of three years.
In his interview with Mint, the RBI Governor reiterated that the RBI does not target any specific exchange-rate level and would intervene only to curb abnormal and high volatility or undue speculation. Malhotra also sought to allay concerns over India's external position. Despite rising crude prices due to the West Asia conflict, he said the balance of payments (BoP) situation was "not an undue concern yet".
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