RBI cuts repo rate by 25 bps to 6.25%; Governor announces additional measures
The Reserve Bank of India (RBI) Monetary Policy Committee (MPC) on Friday ‘unanimously’ decided to reduce the policy rate by 25 bps from 6.50 per cent to 6.25 per cent.
Reserve Bank of India (RBI) Governor, Sanjay Malhotra on Friday said India’s foreign exchange reserves rose for a second straight week and stood at USD 630.6 billion as of January 31.
The reserves increased by USD 1.1 billion in the reported week, after rising by USD 5.58 billion in the prior week.
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RBI Governor said India’s foreign exchange reserves will provide an import cover of over 10 months. Overall, India’s external sector remains resilient as key indicators stay robust.
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Notably, the changes in foreign currency assets are caused by the central bank’s intervention in the forex market as well as the appreciation or depreciation of foreign assets held in the reserves.
The RBI’s move on the forex market aims to curb undue volatility in the rupee.
The rupee had fallen 0.9 per cent against the US dollar in the week to January 31 and hit its then record low of 86.6525 per dollar.
“Our interventions in the forex market focus on smoothening excessive and disruptive volatility rather than targeting any specific exchange rate level or band. The exchange rate of the Indian Rupee is determined by market forces,” the RBI Governor said.
He highlighted that the Reserve Bank’s exchange rate policy has remained consistent over the years. “Our stated objective is to maintain orderliness and stability, without compromising market efficiency.”
It is to be noted that the rupee and other emerging market currencies have been under pressure amid concerns about US President Donald Trump’s tariff plans.
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