Foreign exchange reserves will cushion rupee volatility: RBI

India hopes its record foreign exchange reserves will act as a cushion against rupee volatility when global interest rates start to climb, Reserve Bank of India (RBI) chief Raghuram Rajan said on Monday.

"I have no doubt that when interest rates start picking up in industrial countries, we will be tested. We will be tested by capital outflows," Rajan said on the sidelines of a lecture.

"My hope is that we have done enough in terms of strengthening the macroeconomic fundamentals...I hope we have buffered the economy against that." India`s foreign exchange reserves of $320.56 billion in the week to Aug. 1 are close to surpassing a record high of $320.785 billion in September 2011.