Rupee May Be Undervalued, Will Extend Support For Orderly Movement: RBI Governor

The rupee is under pressure again, but the Reserve Bank of India (RBI) does not see its current level as a sign that the currency is overvalued. RBI Governor Sanjay Malhotra said on October 7, 2026 that the rupee may, in fact, be undervalued based on a number of estimates. He added that the central bank will step in to prevent sharp and disorderly movements in the currency.

The comments came as the rupee moved towards its record low of Rs 96.96 against the dollar during intra-day trade on October 7.

RBI Will Focus On Currency Stability

Malhotra said the RBI’s aim is not to fix the rupee at a particular level. The central bank will instead support an orderly movement in the currency and act against excessive volatility. Currency markets can behave differently over short periods, he said, adding that their movements over a longer period tend to reflect the underlying value of a currency.

He also pointed to the real effective exchange rate (REER), one of the measures used to assess whether a currency is overvalued or undervalued. “By a number of estimates, including the REER, the rupee is not overvalued; it may be undervalued,” Malhotra said.

Oil Prices Add To Rupee Pressure

The rupee has faced pressure for much of the year. The situation became tougher after the start of the West Asia conflict in late February, which pushed crude oil prices higher. This matters for India because it imports much of its crude needs. An increase in oil prices means Indian buyers need more dollars to pay for imports, which can put further pressure on the rupee.

The RBI has taken steps to bring more foreign currency into the system. These include a concessional swap facility linked to foreign currency non-resident (bank), or FCNR(B), deposits and measures related to bond issuances.

Banks have mobilised nearly $133 billion through the FCNR (B) deposit facility. This has also helped ease pressure on the rupee for a short period, but the currency has faced fresh pressure in recent sessions.