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Rajan's key measures to stabilise the rupee and its impact

September 06, 2013 13:48 IST

Rajan's key measures to stabilise the rupee and its impact

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BS Reporter in Mumbai

Raghuram Rajan – the new Reserve Bank of India (RBI) governor – has announced a slew of measures to attract capital flows in the country to provide support to the rupee which has depreciated around 22% in the current financial year.

Here are the 4 key steps and their expected impact:

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Photographs: Danish Siddiqui/Reuters

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Rajan's key measures to stabilise the rupee and its impact

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Measures        

Swap window to banks for fresh FCNR(B) Dollar funds mobilized for at least 3 years at a fixed rate of 3.5% p.a          


Objective        

Boosting forex reserves

Impact

Banks can raise FCNR (B) deposit around 2.5 % cheaper than market rate; $10 billion inflows likely

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Photographs: Reuters

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Rajan's key measures to stabilise the rupee and its impact

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Measures

Overseas borrowing limit of banks has been raised from 50% of unimpaired Tier I capital to 100%       

Objective

More room for banks to raise overseas funds   

Impact

Banks will have the headroom to raise around $ 30 billion

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Photographs: Reuters
Tags: 1

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Rajan's key measures to stabilise the rupee and its impact

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Measures

Exporters can rebook cancelled forward exchange contracts to the extent of 50%, importers to the extent of 25%

Objective

Increase depth of FX market, aid operational ease       

Impact

Exporters, importers will have greater flexibility in foreign risk management

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Photographs: Reuters
Tags: Rajan

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Rajan's key measures to stabilise the rupee and its impact

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Measures

RBI will issue inflation indexed savings certificate linked to the new CPI index

Objective

Attract domestic household savings      

Impact

Encourage household savings, which dropped to an 11-year low in FY12 and reduce structural pressure on current account gap.


Image: RBI Headquarters.
Photographs: Reuters
Tags: FY12 , CPI , RBI

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