look news india
Due to the turmoil in the international markets and continuous selling by foreign investors (FIIs), the Indian currency ‘Rupee’ is currently going through the worst phase in its history. This week, the rupee has fallen to a record low of around 97 per dollar, which has raised concerns about the Reserve Bank of India (RBI).
According to Bloomberg report, RBI Governor Sanjay Malhotra and senior officials of the bank have held several important internal meetings to stop this faster than expected decline in the rupee. Policy makers believe that even though India’s economic fundamentals are strong and the banking system is strong, this strength is not currently visible in the exchange rate. Therefore, the central bank is now prepared to go to any extent to stabilize the rupee.
Let us know which 4 big measures to save the rupee were discussed in these meetings:
1. Possibility of increase in interest rates before the scheduled time
The most effective weapon to stop the fall of rupee immediately is considered to be to increase the interest rates (Repo Rate). However, the next official monetary policy review meeting of RBI 3 to 5 June But in view of the deteriorating market conditions, there are speculations that RBI may change the rates before time (out-of-turn). (Let us tell you that earlier also in May 2022, RBI had suddenly increased the interest rates outside the stipulated time).
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How to get benefit: Due to increase in interest rates in India, the interest rate difference between America and India will increase. This will make the Indian bond market attractive for foreign investors and they will increase investment in India. It is noteworthy that so far this year, foreign investors have withdrawn from the Indian stock market. more than 19 billion dollars Have taken it out.
2. Currency Swap and Liquidity Boost
RBI has started taking immediate steps to remove the shortage of dollars in the market. the central bank $5 billion swap auction (Swap Auction) has been announced. This step will bring immediate liquidity (cash) into the banking system and will also strengthen the dollar reserves of RBI. Many more such auctions can be seen in the coming days.
3. Special NRI Deposit Scheme for expatriates (NRI Schemes)
On the lines of the ‘Taper Tantrum’ crisis of 2013, RBI is also considering bringing a special deposit scheme for NRIs (Non-Resident Indians) this time. Through this, huge amounts of dollars can be raised from abroad. During the 2013 crisis, India got approximately 30 billion dollars from this scheme, whereas this time experts estimate that this figure will be less than Rs. 50 billion dollars Can reach.
4. Sale of Sovereign Dollar Bonds
To increase the inflow of dollars, sovereign dollar bonds can be issued with the help of the government. Although, the final decision on selling government dollar bonds has to be taken by the Central Government, but RBI is seriously considering this option along with the government.
The effect of RBI’s efforts was visible on the market
The effect of RBI’s activism and announcements to increase liquidity was clearly visible on the market on Thursday:
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Rupee recovered: Rupee today after touching record low 0.5% stronger at 96.38 per dollar Came back to level.
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Fall in bond yields: India’s 10-year benchmark government bond yield falls 3 basis points 7.05% But he came.
Way forward: Most economists and market experts believe that in view of the rising domestic inflation in the country and this pressure on the rupee, it is almost certain that the Monetary Policy Committee (MPC) will take a decision to increase interest rates in the upcoming meeting on June 5.