New Delhi, March 28: The Reserve Bank of India (RBI) has issued new directives to banks to prevent the decline of the rupee and curb speculative trading.
The RBI has instructed banks acting as authorized dealers to limit their open positions in rupees to $100 million by the end of each day.
This measure comes amid rising trade deficits due to escalating tensions between the U.S.-Israel and Iran, which have put additional pressure on the rupee.
The central bank stated that all commercial banks must implement this daily limit by April 10. Furthermore, this limit may be adjusted based on market conditions if necessary.
Experts suggest that if the rupee continues to decline, 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 ability to intervene.
On Friday, the rupee fell below 94 per dollar for the first time, dropping nearly 1%. 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.
According to a report, if crude oil prices decline and market valuations (P/E ratios) decrease, the Indian market could see a resurgence.
A report from MK Global Financial Services indicates that the rupee could improve to around 91 per dollar in the near future. Additionally, the yield on 10-year government bonds may decrease from the current 6.83% to approximately 6.65%. It may take 2-3 months for normalcy to return.
Another report states that despite rising fuel prices, India’s economy remains stable; however, crude oil prices will continue to impact the country’s external balance.
If global oil prices keep rising, India’s current account deficit (CAD) could widen, affecting economic growth and inflation.
My name is Ganpat Singh Choughan. I am an experienced content writer with 7 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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