The IMF says India should let the rupee move instead of spending its reserves to defend the currency during the current oil shock.

"We would advise India to let the exchange rate move," Krishna Srinivasan, head of the IMF's Asia and Pacific Department, said in Mumbai on Wednesday.

He said currency intervention has done little beyond the near term, and that exchange rates should work as shock absorbers when oil prices swing.

The rupee fell to near record lows earlier this month, then recovered about 2 per cent after steps by the Reserve Bank of India.

The RBI has sold dollars from its reserves, opened a special dollar window for oil companies and imposed reserve requirements on large hedging deals.

Ranil Salgado, the IMF's senior representative for India, said the June measures were largely positive because they drew capital in rather than using reserves.

In June, India cut taxes on foreign investment in government debt and raised $134 billion through a dollar deposit scheme for the diaspora.

The rupee has lost about 6 per cent against the dollar this year, one of the weakest performances in Asia.

The RBI also raised the repo rate by 25 basis points this month, its first hike in nearly four years. Some analysts expect another in December.

Read the full article for more on the IMF's advice to India on the rupee.