Rupee Undervalued, RBI Governor Says, Even as He Promises Stability: What Sanjay Malhotra Said on 7 October, Why the Rupee Hit 97 Against the Dollar, the RBI's Tools and What It Means for Importers, Exporters and Investors

Rupee undervalued is a rare phrase from a central bank that normally avoids comment on the level, and it follows a similar remark by Deputy Governor Poonam Gupta on 24 September that there is a case for the rupee to stabilise and appreciate. The currency has lost about 9% against the dollar since November 2025, when it traded near 88.7.

If you want to know what the Governor said and what it means, this article covers the rupee undervalued remarks, the rupee vs dollar move from 96.57 to 97.15, why it is weak with oil and dollar demand, what REER says, the tools the RBI governor is using including the FCNR(B) swap window and volatility control, who gains, such as TCS and other exporters, and who loses, scenarios and what to watch.

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What the Governor Said: The Rupee Undervalued Remarks

Topic	Governor Malhotra's remark on 7 October
Valuation	By a number of estimates, including the REER, the rupee is not overvalued and may be undervalued
Stability	The RBI will ensure the rupee stabilises and finds its correct value
Orderly movement	It will support orderly movement and ensure no excessive volatility
Market behaviour	Markets can be irrational in the short term but reflect the right value in the long run
External sector	Headwinds affected capital flows, and pressure on the current account is temporary
Earlier signal	Deputy Governor Poonam Gupta said on 24 September that there is a case for the rupee to stabilise and appreciate

The RBI has said before that it does not target a level for the rupee, so the rupee undervalued message is about volatility and not about a fixed rate.

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Rupee Undervalued but Weak: The Rupee vs Dollar Move

Date	Rupee per dollar	Note
Late November 2025	About 88.7	Earlier reading
29 September 2026	About 96.39 high	Rupee weakened 0.2% that day
7 October, early trade	About 96.57, down 22 paise	After the rate hike
7 October, intraday	97.15	Lowest since 20 May 2026
Fall since November 2025	About 9%	88.7 to 97.15, my calculation

Even with the rupee undervalued on REER, the currency recovered for only a few days after the RBI opened a concessional swap facility for FCNR(B) deposits and bond issuances, but it has weakened again in recent sessions.

Why the Rupee Undervalued Claim Coexists With a Weak Rupee

1. Oil near $100 raises India's import bill and the demand for dollars.
2. The West Asia conflict and global uncertainty push investors toward the dollar.
3. Foreign investors have sold a record amount of Indian equities this year.
4. US Treasury yields near 5.3% and a strong dollar attract global capital to the US.
5. Importers and oil companies buy dollars aggressively when the rupee falls, which can feed the slide.

A rupee undervalued on REER, which adjusts for inflation differences against trading partners, can still weaken in the short run, because flows and sentiment drive the market.

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RBI Tools Behind the Rupee Undervalued Message

Tool	What it does	Status
Concessional swap window	Offers swaps on concessional terms for FCNR(B) deposits and bond issuances to attract dollars	Banks mobilised large FCNR(B) inflows
Forex intervention	Selling dollars to smooth sharp falls	Available; the RBI says it does not target a level
Interest rates	A 25 bps hike to 5.50% narrows the rate gap with the US	Done on 7 October
Forex reserves	A buffer to support orderly moves	The RBI has called them healthy earlier
Communication	Statements on valuation and stability to anchor expectations	The undervalued remark

These tools can slow a fall and support the rupee undervalued message but cannot reverse global forces such as oil and US yields.

Who Gains and Who Loses When the Rupee Is Weak

Group	Effect	Why
IT and pharma exporters	Gain	Dollar revenue converts into more rupees; TCS reports on 8 October
Importers and oil marketing companies	Lose	Costlier crude and imports
Students and travellers abroad	Lose	Higher cost of fees and travel
Borrowers with foreign currency loans	Lose	Repayments cost more rupees
Foreign investors in India	Lose in dollar returns	A weak rupee cuts the value of gains
Gold buyers in India	Cushioned	Gold is down less in rupees than in dollars
Inflation	Higher	Imported inflation adds to the RBI's concern

The rupee undervalued remark does not change who gains and who loses from a weak currency, only how long the RBI expects the pressure to last.

Scenarios After the Rupee Undervalued Remarks

Scenario	What would drive it	Effect
Rupee stabilises near 96 to 97	Oil eases, RBI swap inflows and calmer markets	Supports equities and bonds
Rupee recovers toward 94 to 95	Oil falls and foreign flows return	Helps importers and inflation
Rupee weakens past 98	Oil spikes, US yields rise and FPI selling continues	Raises inflation and RBI pressure

The scenario table for the rupee undervalued debate is illustrative and not a forecast.

Risks to the Rupee Undervalued Case If the Rupee Keeps Falling

Imported inflation: A weaker rupee can push CPI above the RBI's 5.2% forecast.

Rate pressure: A further fall may force more rate hikes, such as the December hike some economists expect.

Foreign flows: A falling rupee can trigger more equity selling and test the rupee undervalued view.

Oil shock: A spike in crude would raise the import bill again.

Credibility: The rupee undervalued claim raises expectations that the RBI must meet with action.

What to Watch Next After the Rupee Undervalued Remarks

1. The rupee level against the 97 mark and the RBI's intervention.
2. Crude oil prices and West Asia developments.
3. FCNR(B) and other inflows under the swap window.
4. Foreign portfolio flows and US Treasury yields.
5. September inflation data and the next RBI policy in December.

Conclusion

The RBI Governor said the rupee undervalued by a number of estimates, including REER, and promised stability, yet the rupee slid to 97.15 against the dollar on 7 October, its lowest since May. Oil, foreign selling and dollar demand are the forces to watch, and the RBI's tools can smooth but not reverse them. Consult a SEBI-registered advisor before making any decision.

Frequently Asked Questions

What did the RBI Governor say about the rupee?

Ans. On the rupee undervalued question, Sanjay Malhotra said that by a number of estimates, including REER, the rupee is not overvalued and may be undervalued, and the RBI will ensure it stabilises.

Where is the rupee vs dollar rate?

Ans. It opened near 96.57 on 7 October and weakened to 97.15, its lowest since 20 May 2026.

What does REER mean?

Ans. The real effective exchange rate measures a currency against a basket of trading partners, adjusted for inflation differences.

Why is the rupee falling if it is undervalued?

Ans. Oil near $100, the West Asia conflict, foreign equity selling and strong dollar demand drive short-term moves.

What is the RBI doing to support the rupee?

Ans. Behind the rupee undervalued message, a concessional swap window for FCNR(B) deposits and bond issuances, intervention to curb volatility and a 25 bps rate hike to 5.50%.

Who benefits from a weak rupee?

Ans. In the rupee undervalued debate, exporters such as IT and pharma companies gain, while importers, students abroad and oil marketing companies lose.

Will the RBI defend a particular rupee level?

Ans. The RBI has said it does not target a level, and the rupee undervalued remark aims to prevent excessive volatility.

Should I buy dollars or foreign assets now?

Ans. This article does not constitute investment advice. Currency moves are uncertain even with the rupee undervalued. Consult a SEBI-registered financial advisor.