What RBI is typically concerned about is volatile movements in the exchange rate. Both large depreciation and appreciation could have significant costs, particularly in terms of inflation (with depreciation) and loss of external competitiveness (with appreciation). This is all the more so if appreciation, as in recent times, is due to volatile capital flows.
Building up the ESM rescue fund is more urgent. We also need to complete the banking union and the capital markets union without undue delay. The banking union envisages a common deposit insurance scheme. Germany has serious misgivings that this would amount to risk-sharing.