Why RBI seem to believe that the rupee is ‘undervalued’? | Explained

The story so far: The Reserve Bank of India (RBI) Governor Sanjay Malhotra, in a recent interview with Business Line , reiterated that the Indian rupee is “undervalued”. This has drawn attention because central bankers rarely comment on whether a currency is priced fairly. Answering a question from one of the four journalists who on Sunday (July 26, 2026) interviewed him, Mr Malhotra reportedly said, “I would like to reiterate that it would be reasonable to think that the rupee is not overvalued. If anything, one could argue that the rupee has become undervalued both in nominal and in REER (real effective exchange rate) terms.”