The Reserve Bank of India (RBI) does not target any specific exchange rate level and relies on market forces to determine the rupee value, Governor Sanjay Malhotra said on Friday.

The RBI’s interventions are aimed only to control excessive volatility, he added.

Malhotra’s comments came two days after the rupee had for the first time breached the 90-per-dollar mark against the dollar. The Indian currency has been slipping against the greenback this year due to foreign fund outflows, the absence of a trade deal with the US and demand for dollars among importers.

With the RBI's monetary policy committee (MPC) lowering the key repo rate by 25 basis points to 5.25%, concerns are being raised on the rupee sliding further.

“Our stated policy has always been that we allow the markets to determine. I mean we don't target price levels or any bands. We allow the markets to determine prices. We believe that the markets, in the long run especially, are very efficient,” he said at a post-policy press conference, adding that the rupee is part of a “very deep market”.

Malhotra cited the example of the rupee’s rebound earlier this year when it reversed from nearly 88 in February to below 84 within three months. “These fluctuations happen. Our effort is to manage abnormal volatility. We are having sufficient reserves. The current account is manageable at about 1% or so, and given the strong fundamentals of our country, we should get good capital flows as well going forward,” he said.

He reiterated that the recent $5-billion rupee-swap is purely a liquidity tool and not an attempt to bolster the currency.