During inauguration of the FICCI-organised Banking Conclave, Chaudhuri said, "Whenever the central bank needs to defend the currency or prevent the inflation from going out of hand, please increase the interest rate, don't choke liquidity."
Chaudhuri said his suggestion would be that if you face this (rupee volatility) situation, do it in a frank, fair and transparent manner without any cover.
"Today the repo rate is 7.25, but funds are not available and from a window money is available at 10.25 per cent. It doesn't help anybody in covering or camouflaging the repo rate. If the repo rate has to be taken to 10.25, so be it but do it in a transparent manner," he said.
He said that the RBI has made it very clear that at the current situation its priority number one is to stabilise the rupee... and for this some liquidity tightening measures have been brought in.