RBI vigilant on rupee volatility, welcomes tax relief for foreign investors in G-Secs

New Delhi [India], June 5 (ANI): Reserve Bank of India (RBI) Governor Sanjay Malhotra on Friday said the central bank remains vigilant against excessive volatility in the rupee and will intervene whenever required, while welcoming the government’s move to exempt foreign investors from capital gains tax on government securities, saying it will strengthen India’s external position.

Responding to an ANI question during the post-Monetary Policy Committee (MPC) press conference, Malhotra said the tax relief for foreign institutional investors (FIIs) investing in government securities was a “positive move.”

“It will further strengthen our balance of payments, and so it’s a welcome move,” the RBI Governor said.

On concerns over speculation in the currency market, Malhotra reiterated that the central bank would closely monitor developments and act when needed.

“If there is any speculation, excessive speculation, or speculation which leads to excessive volatility… any disorderly movement that we see, it’s then that we intervene and we take appropriate macro-prudential regulatory measures,” he said.

“We’ll be watchful, we’ll be vigilant, and we’ll take measures as may be necessary,” he added.

The comments came after the RBI earlier in the day raised its inflation projection for FY27, citing higher crude oil prices and global uncertainties arising from the ongoing conflict in West Asia.

Malhotra stressed that the central bank’s inflation target remains unchanged despite the rise in price pressures.

“The target is not in abeyance at all. It is a target which is sacrosanct for us… It remains 4 per cent. That is what our endeavour is,” he said.

The Governor noted that the RBI would closely monitor whether the current inflation shock becomes persistent and feeds into broader inflation expectations before taking any policy action.

Asked about the key risk being tracked by the central bank, Malhotra said the duration of supply disruptions linked to the West Asia conflict remains the biggest uncertainty.

“The primary, the major risk today is how long the supply disruptions continue and what impact they have on prices,” he said, adding that availability of supplies was “not so much of a concern” at present, while price pressures remain the key issue.

On gold reserves, Malhotra dismissed speculation about the RBI selling gold.

“There is no such sale. There’s only a marginal increase in our gold holdings,” he said.

The Governor also said the proposal to introduce polymer currency notes remains under examination.

“Polymer note is under consideration. We are examining the pros and cons. It is at a preliminary stage,” he said. (ANI)

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