NEW DELHI, Feb 3: The value of Indian rupee is market-determined, and there has been no devaluation, which is a feature of a fixed exchange rate regime, Finance Minister Nirmala Sitharaman said on Monday.
The rupee has been falling in recent weeks, and on Monday touched an all-time low of 87.29 against the American currency.
Various domestic and global factors influence the exchange rate of the rupee such as the movement of the Dollar Index, trends in capital flows, level of interest rates, movement in crude prices, and current account deficit.
In a written reply to the Lok Sabha, Sitharaman said there has been no “devaluation” of the Indian Rupee (INR), which is a feature of a fixed exchange rate regime.
“The value of the INR is market-determined, with no target or specific level or band,” she said.
The minister further said the depreciation of currency is likely to enhance the export competitiveness, which in turn impacts the economy positively. On the other hand, depreciation may raise the prices of imported goods.
“However, the overall impact of exchange rate depreciation on domestic prices depends on the extent of the pass-through of international commodity prices to the domestic market,” she added.
Furthermore, the imports in the economy also depend on various factors, including the demand and supply of commodities in the international market, kind of tradeable (essential or luxury items), freight costs, and availability of substitute goods.
Thus, the impact of the movement of the exchange rate on the import cost and, hence, on domestic inflation and consumer cost of living cannot be isolated, the minister said.
“The approach towards exchange rate management has remained consistent and well-articulated, in terms of which the value of the INR is market-determined, with no target or specific level or band,” Sitharaman said.
Replying to another question, she said unclaimed insurance funds with insurers stood at Rs 21,718 crore at end-March 2024, the Lok Sabha was informed on Monday.
The amount was Rs 23,699 crore at end-March 2023 and Rs 25,403 crore in the preceding year.
Sitharaman said various regulatory measures prescribed by the Insurance Regulatory and Development Authority of India (Irdai) are in place towards reducing unclaimed funds and raising awareness amongst the policyholders regarding the same.
The minister said that to facilitate smoother and speedier claim settlements, Irdai has prescribed documents required for settlement of insurance claims.
Insurers are required to display the information on their websites for information of claimants or beneficiaries.
“Insurers are also instructed not to reject or close a claim for want of documents or for delayed intimation of claim,” the reply said.
With regard to penalties on delay in processing of claims, insurers are required to pay interest at the bank rate plus two per cent to the claimant for the period of delay.
Such interest shall be paid by the insurers suo-moto along with the claim amount, which is applicable to all claims, including unclaimed amounts, Sitharaman said. (PTI)
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