RBI happy with reduction in exchange rate volatility: Rajan

“Our forex reserves are built up on the back of the FCNRs and capital window that we opened where we took the money directly into the reserves,” the governor said and ruled out buying dollars from the market to improve the reserves.

On the impact of the US tapering which is likely to be announced at the Fed meeting today, the Governor said the external environment is something which the RBI cannot be complacent about and it is continually focused on it.

“As I have said before, we are in a better position to withstand the volatility stemming from the tapering,” Rajan said, adding however that nobody, including the Fed themselves, knew the consequence of tapering when it was announced.

“I think the maximum likelihood at this point is tapering light, as some people call, starting tomorrow, but whether it is tomorrow, or next month or a month after it has to happen.  But we are better prepared, but we cannot take the eyes of the ball.”