RBI Governor Shaktikanta Das on Wednesday defended the Reserve Bank's handling of the price situation, saying acting prematurely on inflation would have exerted a heavy cost on the economy and citizens.

Acknowledging that the inflation target has been missed, Das said the RBI decided to support the economy by not introducing a rate hike in face of a spike in inflation.

"We prevented a 'complete collapse of the economy' by keeping rates lower and stayed away from premature tightening," Das said speaking at the annual FIBAC conference of bankers here.

Acting early would have exerted costs to the economy and the people, Das said.

He said the rate-setting Monetary Policy Committee (MPC) is meeting on Thursday to formulate a response to the government, but defended the RBI's move to not make the letter, to be written to the government, public.

Not making the letter public does not compromise transparency, Das said, adding that nothing in the law gives him the authority, privilege and luxury of sharing privileged communication between the government and the central bank.

He said, the communication which will focus on what led to the consumer price inflation staying above the 6 per cent mark for three consecutive quarters, includes measures which the panel is mulling to take and by when will the price situation come into the 2-6 per cent band.

Amid the charged-up debate on rupee depreciation, Das asked everybody not to look at the situation in an emotional manner, asserting that the domestic currency has behaved in an orderly way.

In remarks, that come hours ahead of a review of monetary policy announcement in the US, Das said the US Fed Reserve cannot tighten endlessly and capital flows will eventually resume.

He said the launch of the Central Bank Digital Currency (CBDC) is a landmark moment in the history of currency in the country and will lead to a major transformation of the way business is done.

Retail part of the CBDC trial will be launched later this month, he said.