Current Affairs · RBI Foreign Exchange Management Policy

Case Study: GlobalMacro Analytics, an institutional advisory firm, is reassessing its currency forecasting models following a leadership change at the Reserve Bank of India (RBI). Historically, the firm's models relied on the RBI's tight control over the exchange rate, a strategy executed by the former Governor, who amassed over $700 billion in foreign exchange reserves primarily to defend the currency. Recently, however, growing pressure from the non-deliverable forwards (NDF) market and signals from the new RBI Governor indicate a distinct paradigm shift in foreign exchange management. The firm's analysts must now adapt to a framework that balances market determination with specific stability objectives. Evaluate the following statements regarding the paradigm shift in the RBI's foreign exchange management under the new leadership: 1. Under Governor Sanjay Malhotra, the RBI's new strategy marks a departure from his predecessor by strictly targeting a specific exchange rate level to neutralize pressure from the non-deliverable forwards (NDF) market. 2. The paradigm shift indicates a willingness to permit a wider gap in the rupee's closing level compared to the previous day's close, depending on market conditions. 3. Unlike former Governor Shaktikanta Das, who utilized over $700 billion in foreign exchange reserves to tightly defend the currency, the current approach completely eliminates any targeted interventions, even during excessive volatility. 4. A core objective of the new framework is to avoid targeting a specific level for the rupee, while simultaneously preventing speculative attacks and ensuring exchange rate stability. Which of the above statements are correct?