"I don't think depreciation of rupee hurts the Indian economy. When we have slowing economy and rupee depreciates, it is positive for India," he said in an interview to PTI.
However, Virmani admitted that falling rupee will definitely hurt those companies which have borrowed in the overseas markets. "Those who borrowed abroad will have to pay more," he said.
The Indian rupee last week plunged to 32-month low of sub-51 level against dollar on persisting demand for the US currency from banks and importers. While the depreciating rupee will make imports dearer, it will provide a boost to exports.
Rupee is the fourth most depreciated currency in the world and most depreciated in the Asian continent. Answering questions on Moody's recent decision to lower outlook of the domestic banking system, Virmani said the rating agencies do not understand the Indian situation.
He, however, appreciated the decision of another rating agency -- Standard and Poor's (S&P's) to upgrade the Indian banking system. "Well as you know S&P's has gone the other way. Our banking sector is strong. We have always held that they did not understand the sustainability of Indian fiscal situation. Because much of our fiscal deficit is financed by domestic savings," Virmani said.
"Certain countries like China where banking industry is used for providing subsidies will get weaken. But not in India," he added. Last week, Moody's lowered the rating outlook for the Indian banking, system from 'stable' to 'negative' on concerns of a possible rise in bad loans, capital infusion and profitability.
However, differing with Moody's downgrade, S&P's upgraded the Indian banking sector saying its domestic regulations are in line with international standards. On the current crisis in the euro-zone countries, Virmani said the management of the crisis was primarily the responsibility of the European nations, but it could have implications for the Indian economy.
"The European situation is highly risky and uncertain. The core of the problem has to be solved by them, otherwise nobody can help them," he said, adding, "Certainly, given that we are connected through capital flows with the European banks, any kind of major crisis in euro area will spill over to India."