Press Esc to close
Sunday 25 June 2017
News updated at 5:31 PM IST

RBI announces fresh steps to tackle rupee volatility

Mumbai, Jul 15, 2013 (PTI): 22:45 IST
RBI Governor D Subbarao leaves North Block after meeting Union Finance Minister P Chidambaram in New Delhi on Monday. PTI Photo
In a move to stem the continuing fall of rupee, the RBI tonight came out with a slew of measures including hiking the lending rates for banks and sucking up of Rs 12,000 crore, to make the currency dearer.

The measures came after high level meetings between the Prime Minister and the Finance Minister followed by discussions with RBI Governor D Subbarao who was called here today as the rupee lost 33 paise to reach 59.89 after touching over 61-levels last week.

Under the measures announced, RBI raised lending rates to commercial banks 2 per cent to 10.25 per cent making the loans costlier.

The RBI will conduct sale of Government of India Securities to suck up Rs 12,000 crore on July 18 from the market, in a move to make rupee dearer. Government has been under attack over the continuous decline of rupee from 53.8 levels against dollar in April.

Yesterday, Gujarat Chief Minsiter Narendra Modi had made a blistering attack on government's financial management, including rupee, and targeted Prime Minister Manmohan Singh calling him a "failed economist".

The Marginal Standing Facility (MSF) rate has also been increased to 10.25 per cent from current 8.25 per cent. Repo rate has been left unchanged.

"The Marginal Standing Facility (MSF) rate is calibrated with immediate effect to be 300 basis points above the policy repo rate under the Liquidity Adjustment Facility (LAF)... Accordingly, the Bank Rate also stands adjusted to 10.25 per cent with immediate effect.," the release said.

Introduced during the 2011-12 period, MSF allows banks to borrow money from the central bank at a higher rate when there is significant liquidity crunch.

The central bank said it could take more measures depending on market conditions, liquidity situation and the macroeconomic developments.

These steps would be "consistent with growth-inflation dynamics and macroeconomic stability," RBI said.

"The overall allocation of funds under the LAF will be limited to 1.0 per cent of the Net Demand and Time Liabilities (NDTL) of the banking system, reckoned as Rs 75,000 crore for this purpose," according to the release.

According to RBI, the market perception of likely tapering of US Quantitative Easing has triggered outflows of portfolio investment, particularly from the debt segment.

"The exchange rate pressure also evidences that the demand for foreign currency has increased vis-a-vis that of the Rupee in part because of the improving domestic liquidity situation."

RBI said the rupee has depreciated markedly in the last six weeks. Countries, it said, with large current account deficits, such as India, have been particularly affected despite their relatively promising economic fundamentals.

Last week, RBI had asked oil firm to source all of their 8-8.5 billion of dollar needs every month for import of oil, from a single public sector bank. It also barred banks from trading in currency futures and exchange-traded currency options market on their own.

Go to Top

Photo Gallery
India's Prime Minister Narendra Modi, left and Portuguese Prime Minister Antonio Costa speak...

India's Prime Minister Narendra Modi, left and Portuguese Prime Minister Antonio Costa speak...

Shiv Sena workers protest against and torch the photos of separatist leader Mirwaiz Umar Farooq...

Shiv Sena workers protest against and torch the photos of separatist leader Mirwaiz Umar Farooq...

Police escort escaped prisoner Sayed Mohammed Said from India folowing his capture and return...

Police escort escaped prisoner Sayed Mohammed Said from India folowing his capture and return...

People revel in, and birds flock fly about the high tide at the Marine drive, in Mumbai on...

People revel in, and birds flock fly about the high tide at the Marine drive, in Mumbai on...

Hindu devotees give money to a decorated elephant outside the Jagannath temple on the eve of the...

Hindu devotees give money to a decorated elephant outside the Jagannath temple on the eve of the...

Demonstrators walk behind a police officer during an anti-fascist march, in central, London...

Demonstrators walk behind a police officer during an anti-fascist march, in central, London...

A burning stunt man can be seen during a press viewing of the Stoertebeker Festival on the...

A burning stunt man can be seen during a press viewing of the Stoertebeker Festival on the...

A Dassault Rafale fighter takes part to a flying display during the 52nd Paris Air Show at...

A Dassault Rafale fighter takes part to a flying display during the 52nd Paris Air Show at...

Jools Holland performs on the Pyramid Stage at Worthy Farm in Somerset during the Glastonbury...

Jools Holland performs on the Pyramid Stage at Worthy Farm in Somerset during the Glastonbury...

People move around themselves fire's torch during the San Juan night in the small Pyrenees...

People move around themselves fire's torch during the San Juan night in the small Pyrenees...

Like us on Facebook

Copyright 2017, The Printers (Mysore) Private Ltd., 75, M.G Road, Post Box 5331, Bengaluru - 560001
Tel: +91 (80) 25880000 Fax No. +91 (80) 25880523
Powered by Yodasoft Technologies Pvt. Ltd.