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
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
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