RBI to intervene in forex market, despite the tight liquidity

RBI's recent interventions cut India's forex reserves by $70 bn to $634 bn in 14 weeks till 3 January

- Gopika Gopakumar & Ram Sangal

Tight liquidity will not bind the Reserve Bank of India's (RBI) hands in intervening to curb excessive rupee volatility in the forex market, said a senior official aware of the thinking at the central bank.

"Liquidity will be managed and so will excessive currency volatility," he said. "We have the experience and the tools to manage both."

His comments come in the wake of a perceptible shift in the RBI's defence of the rupee, as observed by market participants.

During the earlier regime under governor Shaktikanta Das, RBI held the currency within a narrow band. But in the past two weeks the rupee has been allowed to slide more freely.