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India would intervene in forex if needed: Subbarao

India would intervene in forex if needed: Subbarao
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First Published: Sun, Oct 10 2010. 06 53 PM IST
Updated: Sun, Oct 10 2010. 06 53 PM IST
Mumbai: India would intervene in the foreign exchange markets if needed to maintain stability, the Reserve Bank of India’s governor D Subbarao said during a panel discussion at the International Monetary Fund (IMF) in Washington on Saturday.
Foreign institutional investors (FIIs) have pumped a record $21.3 billion into Indian equities so far this year, helping push the rupee to a 25-month high last week.
The Reserve Bank of India (RBI), whose official view on the level of the rupee is uncertain and typically intervenes only to soften sharp moves in the partially convertible currency, has refrained from intervention during the recent rupee rally.
“If the inflows are lumpy and volatile or if they disrupt the macroeconomic situation, we will do so,” RBI governor said of intervention.
A surge in fund flows into faster-growing emerging economies has prompted several to intervene to head off appreciation and protect exports.
“Our intervention will be to keep liquidity conditions consistent with activity in the real economy and to maintain financial stability and not to stand against developments driven by changing economic fundamentals,” Subbarao said according to a text of his remarks published on the RBI website on Sunday.
He said India has not intervened because its absorption of inflows has increased as the current account deficit widens on a surge in imports on an upbeat outlook for growth and investment.
“Economies that have current account surpluses or only small deficits have intervened. That does not mean we won’t intervene,” Subbarao said.
He said the central bank would continue to use macro-prudential instruments in order to maintain stability, noting for example a recent move to tighten rules for bank lending against stocks.
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First Published: Sun, Oct 10 2010. 06 53 PM IST
More Topics: Forex | D Subbarao | RBI | Rupee | Dollar |