The objectives and purposes of exchange rate management are to ensure that economic fundamentals are reflected in the external value of the rupee as evidenced in the sustainable current account deficit.
Subject to this general objective, the conduct of exchange rate policy is guided by three major purposes: first, to reduce excess volatility in exchange rates, while ensuring that the movements are orderly and calibrated; second, to help maintain an adequate level of foreign exchange reserves and third, to help eliminate market constraints with a view to the development of a healthy foreign exchange market.