New York, April 19

Reserve Bank of India (RBI) will continue to use currency intervention to reduce volatility in country’s exchange rates, bank’s Governor, Raghuram Rajan, said on Monday.

“There is a school of thought that says: Let the exchange rate move wherever it will,” said Rajan, at the Inaugural Kotak Family Distinguished Lecture held at Columbia Law School in New York.

“That’s something we could do,” Rajan said. “But in emerging markets, you find there are collateral effects of both the capital moving in and going out.”

India will intervene in currency market when there’s a sustainable risk in global markets and the country sees a flood of capital coming in, he said. “We really don’t want currency to move only as result of capital flows,” Rajan said. “We would like it to be more focussed on the underlying fundamentals of trade and services.”