Reserve Bank of India governor Raghuram Rajan put in place rules to curb speculation in the currency markets, made it cheaper for banks to attract FCNR deposits and allowed OMCs to borrow from a special swap window.
The result has been a strong rebound in the rupee. There was succour for the money market too as the MSF rate was gradually lowered and the term repos — for seven and 14 days — were introduced. Putting in place a mechanism that will help banks detect NPAs early on, Raghuram Rajan has offered them sops for a quick decision on handling troubled assets.
RBI GOVERNOR HITS THE GROUND RUNNING
Aug 28:While OSD in RBI, Rajan opened swap window for oil PSUs to buy dollars; took their demand out of the market while keeping forex reserves constant. Later, said oil PSUs could settle swaps in rupees. Allowed banks to transfer bonds from AFS to HTM to avoid large losses from sharply higher yields
Sept 4: Made it attractive for banks to borrow FCNR as well as Tier-I capital by absorbing part of hedging cost
Sept 4: CPI-linked inflation bonds for retail investors
Sept 4:Panel under former RBI governor Bimal Jalan proposed to scrutinise bank licence applications
Sept 20: MSF rate cut by 75 bps to 9.5%, hikes repo by 25 bps to 7.5%. Marginal easing in daily CRR maintenance
Oct 29: MSF rate cut by 25 bps to 8.75%; repo rate hiked by 25 bps to 7.75%
Oct 29: Banks’ access to term repo borrowings raised to 0.5% of deposits from 0.25%
Jan 7: Nachiket Mor panel report on financial services for small business and households
Jan 8: Loan-to-value ratio on gold loans raised to 75% from 60% for NBFCs
Jan 15: Guidelines for banks to safeguard against unhedged forex exposure of companies
Jan 21: Urjit Patel panel submits report on strengthening the monetary policy framework
Jan 28: Repo rate raised by 25 bps to 8%
Jan 30: Framework for encouraging banks to identify NPAs early on