What’s Behind the Recent Rupee Fluctuations? Insights from Finance Minister Nirmala Sitharaman

Rupee's Decline and RBI's Response

New Delhi: On Tuesday, Finance Minister Nirmala Sitharaman addressed the significant depreciation of the Indian rupee over the last 18 months, emphasizing the Reserve Bank of India's (RBI) commitment to mitigating excessive fluctuations in the currency.

During her remarks at the Bloomberg New Economy Forum 2026, she noted that the rupee has hit a low against the US dollar, prompting the RBI to utilize its regulatory authority to maintain stability.

"The RBI is not attempting to set a fixed rate for the rupee; rather, their focus is on curbing volatility. They are dedicated to this effort, and we hope the rupee can establish its own value," she stated.

Recently, the RBI introduced several measures aimed at stabilizing the rupee's value.

Among these initiatives was the establishment of a special facility for oil marketing firms, designed to reduce dollar demand in the spot market, alongside stricter regulations on forex derivatives to limit speculative trading against the rupee.

Additionally, banks have been instructed to maintain a 20% reserve for dollar transactions exceeding USD 2 million.

Sitharaman highlighted that these recent actions by the RBI have positively impacted the rupee, which saw a one percent increase on Monday, reaching Rs 94.96 in early trading on Tuesday.

"I am confident that the RBI will continue to implement measures to prevent excessive volatility in the rupee," she remarked, asserting that India's economic fundamentals remain robust, supported by healthy foreign exchange reserves.

She pointed out that much of the rupee's instability is influenced by external factors, while the government is focused on ensuring sound macroeconomic conditions domestically.

"Investors need not worry about fiscal discipline. However, the rupee's response to fluctuations in the dollar presents challenges that we are addressing," Sitharaman concluded.