Steps taken by India to support rupee
The Reserve Bank of India (RBI) announced further measures on Monday to curb speculative trading in the foreign exchange market, but the move failed to halt the rupee's slide to another record low.
The administrative measures, in addition to directly selling dollars by the central bank in the market, are seen as inadequate to defend the rupee that is pressured by dwindling capital inflows and widening current deficit.
The rupee has slumped more than 11 per cent since the start of March, making it the worst performing currency in emerging markets.
Following are some steps taken this month by the central bank and the government that impact foreign exchange markets.
May 21 - The RBI said net overnight rupee open position limit for Indian banks shall not include positions taken in the currency futures and options segment, thereby reducing speculative trading in the foreign exchange market.
The central bank also said positions taken in the futures and options markets cannot be offset by undertaking positions in the over-the-counter market and vice-versa.
May 10 - The central bank said exporters must cash in 50 per cent of dollar holdings in their accounts within two weeks, to help ease tight supplies.
The RBI also mandated that exporters should exhaust the available dollar balance in their accounts before raising fresh funds from the markets.
May 10 - The RBI allowed intraday trading at five times the net overnight open position limit of the bank or the central bank-approved intraday limit, whichever is higher, allowing banks to take larger positions.
Earlier, traders could not exceed the overnight limit.
May 9 - The central bank eased rules for using foreign currency deposits, by allowing banks to use foreign currency non-resident (FCNR) deposits as collateral against loans to local residents.
May 7 - The government deferred a controversial tax proposal, which had chilled capital inflows, though foreign investors have demanded more clarity about the guidelines.
May 4 - The RBI relaxed the interest rate ceiling on FCNR deposits with maturities of 1 year to less than 3 years, to 200 basis points above the LIBOR or swap rate from 125 basis points.
On 3 to 5-year maturity FCNR deposits, the rate ceiling was relaxed to 300 basis points above LIBOR.
The central bank also allowed banks to freely determine the interest rates on export credit in foreign currency.
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