Mumbai, May 25 -- The Indian rupee is not overvalued and may, in fact, be undervalued after its recent depreciation, Reserve Bank of India (RBI) Governor Sanjay Malhotra said in an interview with Mint. This comes in the backdrop of the currency approaching the psychologically-significant 100-per-dollar mark amid the ongoing West Asia war. "With the recent depreciation, it would be reasonable to think that rupee is not overvalued. If anything, one could argue that rupee has become undervalued, both in nominal as well as in Reer (real effective exchange rate) terms," Malhotra said. He reiterated that the RBI does not target any specific exchange-rate level and would intervene only to curb abnormal and high volatility or undue speculation.The governor also sought to allay concerns over India's external position. Despite rising crude prices due to the West Asia conflict, he said the balance of payments (BoP) situation was "not an undue concern yet"."It's not an undue concern yet it requires some attention in form of concerted efforts by the government, RBI and all institutions concerned," he said, adding that India needed to continue long-term measures aimed at enhancing competitiveness and exports, reducing import dependence and attracting capital.The Indian rupee has fallen by 11% in FY26 and by over 5% since the US-Iran war began on 28 February this year.Malhotra's statement comes at a time when, of late, former governor D. Subbarao and Arvind Panagariya, the chairman of the 16th Finance Commission, have reasoned that defending the rupee was "self-defeating" and that 100 against the dollar was just a number.While admitting that higher crude prices would affect India's debt, he allayed concerns, noting that he expected capital flows to remain robust. "On the current account side, there would be pressure due to elevated crude prices. However, growth in gold imports may not show the same momentum as gold prices may not appreciate as much as in previous years," he said, adding that the country's services exports are likely to stay resilient, while the war's impact on remittances would be minimal. "Overall, there would be a moderating influence on our current account deficit," he said. Crude prices have been on the boil since the blockade of the key energy pathway, Strait of Hormuz, in the US-Iran war. From just over $70 a barrel before the war started end February, prices are hovering at over $100, putting pressure on India's import bill and elevating inflationary pressures across the economy.On the capital account side, he said gross capital flows have been robust and that gross foreign direct investments reached a historical peak of $94.5 billion in 2025-26, up 17%. "This is an indication of our attractiveness as an investment destination." For BoP (Balance of Payments), purposes, however, it is the net FDI (Foreign Direct Investment), which is more relevant, he said. "It is primarily because of higher repatriations and ODI (Overseas Direct Investment ) that our net numbers have not been as encouraging as gross," the governor said. "But, even on a net basis, we are witnessing improvements. In 2025-26, India's net FDI flows stood at $7.7 billion, higher than $1.0 billion in 2024-25. Going forward, I expect the outflows to moderate, especially the repatriations as equity valuations have largely corrected. So, there is a good possibility for a better capital account this year."...