Economic Affairs Secretary Arvind Mayaram on Saturday discussed the continuing rupee fall and the resultant macro-economic impact with the treasury heads of leading foreign banks.
The closed-door meeting held at the LIC headquarters here was attended by treasury heads of foreign banks like Standard Chartered, HSBC, among others. Though Mayaram spoke to waiting reporters, he refused to talk about the outcome of the meeting.
According to sources, he discussed the crucial NDF (non- deliverable forwards) market, which largely influences the movement of rupee in the domestic market.
"What is significant is that the RBI does not have any control on this market. In the RBI's annual report released recently, it has admitted that there is deeper correlation between the rupee movement in the on-shore and offshore market.
"During the period of rupee depreciation, shocks originating in the NDF market may carry more information which gets reflected in the onshore segments of the market through mean and volatility spillovers," the RBI said in its annual report quoting its internal research, released on August 22. After sinking to a record low of 68.85 against the US dollar on August 28, it stabilised on Friday to close at 65.70.
The meeting assumes importance as foreign banks are big players in the NDF market and its influence of the market is high as volumes are too large in comparison to domestic.
NDF deals are forward transactions settled in dollars because the rupee, being not fully convertible, cannot be delivered outside the country.
On the June quarter GDP numbers, he said the reading was expected, but said there are chances of revival in the second half. The economic growth slipped to the lowest since the 2008 crisis to 4.4 per cent in the first quarter against 5.4 per cent in the same quarter last fiscal.
Mayaram said revival in growth in the second-half of this fiscal will be driven by the higher government expenditure and on account of the project approvals given by Cabinet Committee on Investments.