SEBI Reg. Investment Advisor

Download App

MoneyWorks4Me

Central bank must allow rupee to depreciate to help absorb external pressures: Former RBI Governor

29 May 2026 Evaluate

Amid geopolitical uncertainty and the West Asia crisis weighing on local currency, the Former RBI Governor Duvvuri Subbarao has said the central bank must allow some more depreciation in the rupee to help absorb external pressures, and choose liquidity measures, rather than going for rate hikes, if inflation risks intensify. He noted that the monetary policy should be used as a ‘last resort’ to defend the exchange rate. Further, the rupee should be allowed to adjust rather than be rigidly defended because the current pressures reflect a deterioration in India's external balance. A weaker rupee acts as a natural shock absorber.

Subbarao pointed that stabilising the exchange rate during times of pressure is fundamentally a challenge of managing expectations and the Exchange-rate crises are ultimately crises of confidence. He added that if investors, importers and households begin to believe the rupee will weaken further, they behave in ways that actually make it weaken further. Exporters delay bringing money back home, importers rush to buy dollars, households move into gold, and investors hedge aggressively. Therefore, communication becomes as important as intervention and policymakers must act decisively, but without appearing panicked or defensive.

Moreover, he highlighted that Monetary Policy Committee has a difficult balancing act with limited room to manoeuvre. He pointed that that lowering interest rates to support growth could aggravate inflation and intensify exchange-rate pressures, while aggressive rate increases could hurt economic activity and impact the GDP growth. For the current situation, he suggested that RBI should wait and assess whether inflationary pressures become broader through the system, instead of immediately resorting to policy rate hikes.

About MoneyWorks4Me

MoneyWorks4Me is a SEBI-registered Investment Adviser (IA) dedicated to helping investors build long-term wealth through transparent, research-driven, conflict-free guidance. Founded in 2008, we started our journey as a Research Analyst (RA), providing deep fundamental analysis, intrinsic value insights, and long-term investing frameworks for Indian equities. In 2017, we transitioned to a full-fledged SEBI-registered Investment Adviser, strengthening our commitment to acting as a fiduciary—always putting the investor’s interest first.

Our Vision

To become India’s most trusted, research-powered fiduciary advisory platform—where every investor, regardless of experience, can make calm, confident, and well-reasoned investment decisions.

What Makes MoneyWorks4Me Different

Our Approach: Ensuring compounding work its magic on client portfolio.

MoneyWorks4Me ensures this through: