RBI governor Sanjay Malhotra on Friday said he does not expect India’s current account deficit (CAD) to touch 2 per cent of GDP despite the rupee’s persistent depreciation against the dollar. He reiterated that the central bank will not target any specific exchange rate and will allow market forces to guide currency movement.

India’s CAD rose to 1.3 per cent of GDP in Q2FY26 from 0.27 per cent in Q1FY26, though it remained below the 2.2 per cent recorded a year earlier. The sequential increase was driven by a wider merchandise trade deficit, which expanded to $87.4 billion in Q2FY26 from $68.5 billion in the previous quarter.

Strong services exports and robust remittance inflows are expected to keep the deficit contained through FY26, Malhotra said.

He noted that currency volatility is not unusual, recalling how the rupee briefly touched 88 per dollar in February before strengthening to 84 within three months. India’s foreign exchange reserves, at $686.2 billion, provide more than 11 months of import cover, reinforcing external sector resilience.

Bond yields fell after the RBI announced liquidity infusion measures to aid policy transmission, with the 10-year yield easing to 6.5 per cent. Analysts expect the benchmark yield to fall to 6.25 to 6.30 levels in the coming months.