Steps RBI, government can take to stabilise rupee
The rupee's fall to record lows has raised chances that the Reserve Bank of India will take more steps to support the currency, as a strategy built on tightening rupee money markets and raising short-term interest rates has had limited effect.
August 07, 2013 / 12:46 IST
The rupee's fall to record lows has raised chances that the Reserve Bank of India will take more steps to support the currency, as a strategy built on tightening rupee money markets and raising short-term interest rates has had limited effect.
Also read: Expect Indian Rupee to trade in 61.35-61.85 range: KarvyThe worst performing Asian currency of the year so far hit a new life low of 61.80 rupees per dollar on Tuesday, breezing past a previous low of 61.21 hit on July 8. Central bank intervention helped the rupee recover, but by Wednesday it was sliding once again, to stand around 61.35 by 11 a.m.Below are the possible steps that the RBI or the government could take to support the currency.RBI ACTIONS* FX intervention* Tighten liquidity further by:- Raising banks' statutory liquidity ratio of 23 percent- Further reducing how much banks can borrow from theRBI under the daily repo auction- Reducing the amount of funds RBI provides to banks under the export refinance scheme at the repo rate- Bond sales via open market operations- Raising banks' cash reserve ratio, now at a record low4 percent* Raise the policy repo rate, currently at 7.25 percent* Provide a dollar-window for oil firms to pay for imports* Buy oil bonds from companies by paying dollars* Ask exporters to convert FX dollar holdings immediately* Ask importers to delay or stagger dollar payments* Curb speculation by cutting net open position limits* Persuade banks and financial firms to raise funds abroadGOVERNMENT MEASURES* Raise foreign investment limits in debt* Increase duties on non-essential imports, like electronics* Attract money from Indian citizens abroad, or issue sovereign debt* Announce additional fiscal, economic reforms Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
