The Reserve Bank of India (RBI) should not let the “psychology of ₹100 per dollar” prevent it from letting the exchange rate fall beyond that limit, chairman of the Sixteenth Finance Commission Arvind Panagariya said on Thursday (May 21, 2026).

“Dear @RBI: Do not let the psychology of Rs 100 per dollar determine your policy response. 100 is just a number, like 99 and 101. Whether the oil shortage is short-lived or long-lived, the right response at this moment is to let the rupee depreciate,” Mr. Panagariya posted on the social media platform X. 

This comes at a time when the rupee nearly touched ₹97 to a dollar in the intraday trade on Thursday (May 21, 2026), with traders saying the RBI intervened to prevent it from crossing that limit. 

Mr. Panagariya argued that, in the case of the oil shortage being short-lived, the rupee will depreciate now but will “substantially recover” once the oil import bill shrinks and foreign capital seeks Indian investments precisely to take advantage of the cheaper rupee. 

If the oil shortage lasts longer than a year, he said that resorting to “anything other than depreciation will be a losing proposition”, adding that trying to defend the rupee will “continue to bleed the reserves until they are exhausted”.

“Nor would the dollar-denominated bonds or high-interest dollar-denominated NRI deposits turn out to be more than a band-aid,” Mr. Panagariya added, presumably referring to news reports that the RBI was considering these options to protect the rupee. “Eventually, you will have to cross the 100-rupee-per-dollar psychological barrier.”

He added that dollar-denominated bonds and high-interest NRI dollar deposits are “costly instruments that pay significantly higher interest” than the rate India earns on its own foreign-currency reserves. 

“It is largely a transfer to rich NRIs,” Mr. Panagariya said. 

“This is not 2013: Inflation was in the double digits in 2013. Thanks to your [the RBI’s] prudent monetary management, that is not the case now. Therefore, the economy is well-positioned to absorb some inflationary pressure that will accompany the depreciation,” he said.