Govt to team up with RBI to boost weakening Re: HDFC

Ashish Parthasarthy, head treasurer, HDFC Bank explains to CNBC-TV18 the rupee reflecting the weakness in global sentiment, the risk of the dollar strengthening across currencies and India's burgeoning current account deficit.

He adds that apart from short-tern measures, the government and the RBI will have team up to implement initiatives that will keep the rupee firm in the long-term. 

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Below is an edited transcript of the interview on CNBC-TV18.  Also watch the accompanying video.

Q: What you think is happening with the rupee?

A: Obviously, the Indian government's current account deficit is quite well known. Apart from that, I think the global sentiment is quite weak, the risk of dollar getting stronger across the globe and across various currencies. All this is being reflected in the rupee.

Q: We have some statements from finance ministry which suggest that there is no need for a special dollar window for OMCs at this point of time.

Even if they were to implement it, how much of an impact do you think it could have on the spot markets, how much do the OMCs contribute in terms of overall volumes while dollar is being bought?

A: OMCs are a regular presence in the daily market buying dollars for their import. So moving them out, would of course, cause significant changes in the demand for rupee in the market. Obviously, demand will be there and it will have to be supplied by the RBI.

However, it will also make the markets that much more illiquid. So there is a pro and con to that measure. But it will definitely impact the daily demand and daily pressure on the dollar-rupee.

Q: Aside of this direct dollar window, is there any other measure that the RBI can take at this point to take the pressure off, aside of, direct intervention?

A: On a daily basis, I think it is only to secure the demand and also supply dollars. Anything else is more a medium-term or long-term option where you encourage and enforce into the country either by way of borrowing, IMB bonds or by creating conducive conditions for FDI to come in. Implementing is a medium- and long-term measures entails the involvement of the RBI and the government to take decisions.