Indian Rupee Value Is Market-Determined with No Fixed Targets, Says Finance Minister Nirmala Sitharaman

The Indian rupee's value is determined by market forces, not devaluation, which is a characteristic of a fixed exchange rate system, Finance Minister Nirmala Sitharaman stated. Recently, the rupee has been declining, reaching a record low of 87.29 against the US dollar. Various factors like the Dollar Index, capital flows, interest rates, crude prices, and current account deficit affect the rupee's exchange rate.

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In her written response to the Lok Sabha, Sitharaman reiterated that there has been no "devaluation" of the Indian Rupee (INR), which is typical of a fixed exchange rate regime. The INR's value is determined by market dynamics without any specific target or range. She mentioned that currency depreciation might boost export competitiveness, positively impacting the economy.

Impact on Imports and Inflation

However, depreciation could lead to higher prices for imported goods. The overall effect on domestic prices depends on how much international commodity prices influence the local market. Additionally, imports are influenced by factors such as global demand and supply, types of goods traded, freight costs, and availability of substitutes.

Sitharaman explained that the impact of exchange rate fluctuations on import costs and domestic inflation cannot be isolated. The approach to managing exchange rates remains consistent and well-defined, with the INR's value being market-determined without any specific target or band.

Unclaimed Insurance Funds

Addressing another query, Sitharaman informed that unclaimed insurance funds with insurers amounted to Rs 21,718 crore at the end of March 2024. This figure was Rs 23,699 crore at the end of March 2023 and Rs 25,403 crore in the previous year. Regulatory measures by the Insurance Regulatory and Development Authority of India (Irdai) aim to reduce unclaimed funds and increase policyholder awareness.

Irdai has outlined necessary documents for smoother claim settlements. Insurers must display this information on their websites for claimants or beneficiaries. They are also instructed not to reject claims due to missing documents or delayed notifications.

Penalties for Delayed Claims

Regarding penalties for delayed claim processing, insurers must pay interest at the bank rate plus two percent for the delay period. This interest should be paid automatically along with the claim amount and applies to all claims, including unclaimed amounts.

Sitharaman highlighted that these measures ensure smoother claim settlements and protect policyholders' interests. The focus remains on reducing unclaimed funds while ensuring timely settlements for claimants.