From Financialexpress · FE Bureau · · 1m 10s
RBI's forex surprise moves stabilize rupee
RBI's surprise FCNR scheme and policy shifts stabilized rupee after 4 months of market volatility.
In brief
RBI's surprise FCNR scheme and policy shifts stabilized rupee after 4 months of market volatility. RBI's surprise FCNR scheme and policy shifts stabilized rupee after 4 months of market volatility. Originally reported by Financialexpress.
RBI's surprise policy approach
The RBI used rational expectations theory to surprise markets with forex reforms.
FCNR scheme launch
RBI introduced foreign currency non-resident deposits scheme after stating strong forex reserves.
Ruble strength boost
Rupee strengthened by 90 paise within days as banks rushed to deposit funds.
Scheme termination
RBI terminated FCNR scheme by month-end after $57 billion inflows.
Reserve fluctuations
RBI's forex reserves peaked at $648 billion then dropped to $604 billion.
Bank credit growth
Banks added rs 24 lakh crore between may and september with fcnr inflows.
CRR rate hike
RBI raised daily crr balances after policy meeting causing bond yields to rise.
Derivative market changes
RBI reduced trading limits for speculative activities in forex derivatives.
Market stabilization
Rupee stabilized at 95-96 range after derivative market measures.
The essence
RBI's surprise FCNR scheme and policy shifts stabilized rupee after 4 months of market volatility.
