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The International Monetary Fund is expected to update its classification of India's foreign exchange management framework soon, according to a recent Bloomberg report citing people aware of the discussions. This move follows the IMF's earlier decision, made about two years ago, to shift India's regime from 'floating' to 'stabilized arrangement', a label the Reserve Bank of India had strongly disagreed with at the time. The IMF had continued this classification for the period stretching from December 2022 to November 2024. The latest development comes at a time when the rupee has shown increased volatility under RBI Governor Sanjay Malhotra, who assumed office late last year.
The International Monetary Fund is expected to revise its assessment of India's foreign exchange rate management framework soon, according to a recent Bloomberg report that referred to people familiar with the matter. The update is anticipated to come at a time when currency movements have been drawing renewed attention in global and domestic markets. Advertisement
The expected shift follows an earlier IMF decision made roughly two years ago, when the institution changed India's classification from a 'floating' regime to a 'stabilized arrangement'. At that time, the Reserve Bank of India had expressed the view that this assessment was incorrect and unjustified. The IMF continued to apply this tag for the period from December 2022 to November 2024 during its most recent review conducted last year.
The latest indication of a possible reclassification has emerged while the rupee has been experiencing episodes of higher volatility. This has been observed under the leadership of Sanjay Malhotra, who took charge as the RBI Governor late last year. India's currency management practices have often drawn scrutiny during times of market movement, and the upcoming IMF decision is expected to draw interest given the earlier disagreement between the central bank and the global body.
Past assessments from the IMF have played a role in shaping global perceptions of India's currency framework, and any update to this classification may influence how international investors interpret the RBI's approach. However, the central bank has consistently maintained that it allows the market to determine the exchange rate while intervening only to manage undue volatility.
Source Reuters
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