Against the above background, this chapter attempts to analyse the role of the central bank in developing the foreign exchange market. Section I provides a brief review of different exchange rate regimes being followed in emerging market economies (EMEs). Section II traces the evolution of India’s foreign exchange market in line with the shifts in India’s exchange rate policies in the postindependence period from the pegged to the market determined regime. Various regulatory and policy initiatives taken by the Reserve Bank and the Government of India for developing the foreign exchange market in the market determined set up have also been highlighted. Section III presents a detailed overview of the current foreign exchange market structure in India. It also analyses the available market infrastructure in terms of market players, trading platform, instruments and settlement mechanisms. Section IV assesses the performance of the Indian foreign exchange market in terms of liquidity and efficiency. The increase in turnover both onshore and offshore markets is highlighted in this section. Empirical exercises have also been attempted to assess the behaviour of forward premia, bid-ask spreads and market turnover. Having delineated the market profile, Section V then discusses the journey of the Indian foreign exchange market since the early 1990s, especially through periods of volatility and its management by theauthorities. As central bank intervention has been animportant element of managing volatility in the foreign exchange market, its need and effectiveness in amarket determined exchange rate and open capital regime has been examined in Section VI. Section VII makes certain suggestions with a view to further deepening the foreign exchange market o that it can meet the challenges of an integrated world. Section VIII sums up the discussions.