The Reserve Bank of India will "enhance intervention toolkit" to curb undue rupee volatility versus the U.S. dollar in fiscal year 2025, it said in its annual report on Thursday, without specifying what new tools it would use.

"Going forward, the liquidity operations would continue to be in sync with the stance of the monetary policy, while the foreign exchange operations would be guided by the objective of ensuring orderly movements in the exchange rate of the rupee," the central bank said.

The RBI intervened in the forex market through operations in the onshore/offshore over-the-counter and exchange-traded currency derivatives segments to maintain orderly market conditions and contain excessive volatility in the exchange rate, it said in the report.

India's central bank has been changing tactics in the way it seeks to limit rupee volatility, with the use of non-deliverable forwards now overtaking spot market interventions, which draw heavily on foreign exchange reserves.

RBI's net income surged 141% for the financial year ended March 2024, largely on the back of a sharp contraction in expenditures, particularly lower provisions, the annual report showed.

The RBI said it would also issue consolidated instructions on the liquidity adjustment facility in fiscal 2025.

The announced inclusion of Indian government bonds in global bond indices is expected to have a salutary impact on the government securities market in terms of enhancing liquidity, price discovery and diversity in the participation base, RBI said.

It plans to make a framework for a comprehensive integrated reporting of foreign exchange transactions while also announcing measures to improve the role of GIFT City at Gandhinagar, Gujarat vis-à-vis other international financial centres.

Headline inflation is expected to moderate further, the RBI added, although its trajectory would depend critically upon the evolving supply-side and weather conditions.

"While proactive supply-side interventions by the government are critical to keep food price pressures under check, monetary policy will remain resolute in its pursuit of price stability so that inflation is aligned with its 4% target on a durable basis and inflation expectations are anchored," it said.

(Reporting by Swati Bhat; Editing by Janane Venkatraman )