Why RBI seem to believe that the rupee is ‘undervalued’? | Explained
RBI Governor Sanjay Malhotra has suggested that the Indian rupee is currently undervalued in both nominal and real effective exchange rate terms. While he clarified that the central bank does not target specific currency levels, his comments provide insight into the RBI's assessment of economic strength amid global volatility.
Why it matters
Central bank commentary on currency valuation significantly influences investor sentiment and market expectations for future monetary policy.
The story so far: The Reserve Bank of India (RBI) Governor Sanjay Malhotra, in a recent interview with Business Line , reiterated that the Indian rupee is “undervalued”. This has drawn attention because central bankers rarely comment on whether a currency is priced fairly. Answering a question from one of the four journalists who on Sunday (July 26, 2026) interviewed him, Mr Malhotra reportedly said, “I would like to reiterate that it would be reasonable to think that the rupee is not overvalued. If anything, one could argue that the rupee has become undervalued both in nominal and in REER (real effective exchange rate) terms.”
He added that the RBI does not target any specific exchange rate or band for the rupee.
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