Reserve Bank of India (RBI) Governor Sanjay Malhotra on Wednesday said despite strong macroeconomic fundamentals, the Indian rupee in 2025-26 depreciated more than the average in previous years. The currency has depreciated by over 4% since the war, which has consequences for pushing up import inflation. 

The governor said that going ahead, the RBI will remain “proactive and pre-emptive” in managing liquidity conditions while reiterating that the central bank’s exchange rate policy remains unchanged. During his speech, he mentioned that interventions will continue to curb excessive volatility. 

Malhotra noted that healthy remittance inflows are expected to keep the current account deficit (CAD) within sustainable levels. He also highlighted that India continues to be an attractive destination for greenfield foreign direct investment (FDI) projects. 

India’s foreign exchange reserves remain strong at $696.1 billion as of April 3, providing a buffer against external shocks, the governor said. 

Policy stance unchanged amid global uncertainties 

This was the first monetary policy review after the government last month renewed the inflation targeting framework, mandating the RBI to maintain retail inflation at 4%, with a tolerance band of ±2%, for another five years until March 2031. 

The central bank kept interest rates unchanged, in line with expectations, as signs of a potential global recovery emerged following a ceasefire in the six-week-long US–Israel–Iran conflict. 

The raging tensions in West Asia had disrupted energy supplies, pushed up crude oil prices, and heightened fiscal and inflationary risks for import-dependent economies such as India. 

Rupee, oil markets react to ceasefire 

Following the ceasefire announcement, the rupee appreciated by 50 paise to 92.56 against the US dollar in early trade. It opened at 92.92 in the interbank foreign exchange market and strengthened from its previous close of 93.06 recorded on Tuesday. 

Meanwhile, Brent crude prices declined sharply, falling 12.68% to $95.42 per barrel in futures trade, reflecting easing supply concerns. 

The market rally came after U.S. President Donald Trump announced a two-week suspension of military strikes against Iran ahead of a self-imposed deadline. Iran, in turn, agreed to ensure safe navigation through the Strait of Hormuz during the ceasefire, triggering broad-based gains across global financial markets, including currencies and equities.