New Delhi, March 28: The Reserve Bank of India (RBI) has issued new directives to banks aimed at halting the decline of the rupee and curbing speculative trading.
The RBI has instructed banks operating as authorized dealers to limit their open positions in the rupee to $100 million by the end of each trading day.
This measure comes in response to increasing trade deficits exacerbated by tensions between the U.S.-Israel and Iran, which have put additional pressure on the rupee.
The central bank has mandated that all commercial banks implement this daily limit by April 10. Furthermore, this limit may be adjusted based on market conditions as necessary.
Experts suggest that if the rupee continues to depreciate, the RBI may take further stringent actions. They also noted that the RBI has significantly utilized its foreign exchange reserves to support the rupee, which has somewhat limited its capacity for intervention.
On Friday, the rupee fell below 94 per dollar for the first time, marking a nearly 1% decline. Since the onset of the U.S.-Iran conflict, the rupee has depreciated by over 4%.
Meanwhile, Brent crude prices remain above $100 per barrel, significantly higher than the RBI’s estimate of $70 set in October. This surge has increased India’s import bill, complicating the RBI’s efforts to manage inflation and currency stability.
A report indicates that if crude oil prices decline and market valuations (P/E ratios) decrease, the Indian market could see a resurgence.
According to MK Global Financial Services, the rupee may recover to around 91 per dollar in the near future. Additionally, the yield on 10-year government bonds could drop from the current 6.83% to approximately 6.65%. Normalcy may take 2-3 months to return.
Another report suggests that despite rising fuel prices, India’s economy remains stable. However, ongoing high crude oil prices will continue to affect the country’s external balance.
If global oil prices keep rising, India’s current account deficit (CAD) could widen, impacting economic growth and inflation.
My name is Himanshu Tiwari. I am an experienced content writer with several years of expertise in the field. Currently, I contribute to Daily Kiran, creating engaging and informative content across a variety of categories including TECHNOLOGY, health, travel, education, and automobiles. My goal is to deliver accurate, insightful, and captivating information through my words to help readers stay informed and empowered.
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