For Rupee A Govt _RBI Jugalbandi

 Dear Sir,

                                       For Rupee A Govt _ RBI Jugalbandi

Apropos your report, "A Govt–RBI Jugalbandi?" ET dated June 6, 2026, the very stance adopted by the RBI in its latest Monetary Policy—maintaining policy rates despite acknowledging persistent inflationary pressures arising from ongoing geopolitical uncertainties and challenging domestic and global socioeconomic conditions—suggests that the central bank is currently placing a greater emphasis on sustaining economic growth than on aggressively containing inflation.

The neutral and accommodative posture of the RBI may be influenced, at least in part, by the imperative to contain excessive rupee depreciation, a legitimate and pressing concern in the present circumstances. The steps to attract forex flows include investments in government bonds and equities, raising external commercial borrowings, and agreeing to bear the hedging cost on fresh three-to-five-year FCNR(B) deposits. It remains to be seen how far these measures can boost the flow and sustain the rupee's stability; this outcome is unpredictable.  However, in pursuing this objective, the RBI must ensure that it does not gradually transform itself into a risk-bearing institution. Its primary role remains that of the nation's central bank, lender of last resort, and guardian of monetary and financial stability.

While supporting growth is essential, the RBI must carefully balance this objective against its responsibility to preserve price stability, safeguard the currency's value, and maintain confidence in the financial system. The institution's credibility lies in its ability to act as a prudent custodian of the economy rather than as an absorber of risks that properly belong elsewhere in the economic system.

T.V. G Krishnan

( personal Views)