[1]The rupee and bonds rallied on Thursday as measures announced by the Reserve Bank of India (RBI) chief Raghuram Rajan late on Wednesday raised hopes of a new approach to the current crisis, while the move to start a discounted swap window for banks also aided.
The RBI will offer a swap window to banks for fresh dollar deposits mobilised from non-resident Indians, which will be available to lenders until November 30, 2013.
The partially convertible rupee was at 65.95 per dollar compared with its close of 67.06 on Wednesday.
The BSE Sensex rose more than 450 points and the Nifty gained over 150 points on Thursday as Rajan's comments on potential measures sparked hopes of more reforms aiding the economy and the currency.
Shortly after he took over as the 23rd Governor of the central bank, Rajan, 50, laid out a detailed roadmap on liberalising markets, including more rupee trade settlment and introduction of new financial products like interest rate swaps. He also rescheduled by a few days the date for his much- anticipated first monetary policy statement to September 20.
Rajan said the new bank licences will be issued around January next year.
In an apparent shift in the approach from his predecessor D. Subbarao, Rajan said the primary role of the bank is monetary stability to sustain confidence in the value of the rupee.
"Ultimately, this means low and stable expectations of inflation, whether that inflation stems from domestic sources or from changes in the value of the currency, from supply constraints or demand pressures. ...but we have two other important mandates; inclusive growth and development, as well as financial stability," he said.
The benchmark 10-year bond yield dropped as much as 22 basis points to 8.17 percent.
Blue chip shares, especially banks, jumped with NSE bank index surging as much as 9.4 percent after the new RBI governor announced a slew of measures to ease liquidity pressures on banks.
ICICI bank Ltd rose 7.76 per cent while Axis Bank Ltd rose nearly 10 per cent.
Other measures announced by Rajan include enhancing the re-booking limit on cancelled forward exchange contracts for exporters to 50 per cent, extending a similar facility to importers and introducing cash settlement in 10-year interest rate future contracts to develop the money and G-sec markets.
Rajan said the RBI will take steps to reduce the Statutory Liquidity Ratio (SLR) and introduce greater regulatory and supervisory control over the domestic operations of foreign banks. He promised to give freedom to banks to open branches without prior RBI permission.
The new RBI chief also said he will steadily liberalise the markets and lift restrictions on investment and position-taking, together with SEBI, and will examine introduction of interest rate futures on overnight interest rates.
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