Skip to main content

Intervention in currency market to continue:RBI

By
The Reserve Bank of India (RBI) will continue to intervene in the currency market, as volatility in exchange rate can impact some of the country’s institutions, which might not be as robust as those in developed markets.
“There is a school of thought that says: Let the exchange rate move wherever it will,” RBI governor Raghuram Rajan said at the Inaugural Kotak Family Distinguished Lecture held at Columbia Law School in New York.
“That’s something we could do,” Rajan said. “But in emerging markets, with institutions not as strong as industrialised countries, you find there are collateral effects of both the capital moving in and going out.”
To prevent such collateral damage, the central bank will intervene in the currency market when there is a sustainable risk in global markets and the country sees a flood of capital coming in, he said.
The exchange value should reflect the country’s underlying fundamentals of trade and services.
“We really don’t want the currency to move only as result of capital flows... We would like it to be more focused on the underlying fundamentals of trade and services.”
However, the banking regulator never prevents the currency from finding its own value, but it benefits from the volatility by accumulating reserves, Rajan said. “We let the exchange rate move. We never stand in the way, but we pick up some as flows come in.”
India’s foreign exchange reserve stood at $359.9 billion as on April 8 as RBI picked up foreign exchange in the process of intervention.  The RBI governor had recently said the inflation targeting framework pursued by the central bank would ensure “volatility in the currency would be a thing of the past”. Since the currency level is determined by inflation differential between two countries, predictable inflation path in a fund-recipient country eliminates the chance of volatility and thus attracts capital. 
In addition, the central bank said in its monetary policy on April 5 that it would first prefer to buy foreign currency assets to manage liquidity. Rajan reiterated that the central bank was still in an accommodative monetary policy stance. RBI has so far reduced its policy rates by 150 basis points (bps), latest by 25 bps on April 5.
“As evidence of inflation and monsoon build one way or the other, this will give us more information about the direction of monetary policy,” said Rajan.
Business Standard New Delhi,20th April 2016

Comments

Post a Comment

Popular posts from this blog

Credit card spending growth declines on RBI gaze, stress build-up

By
  Credit card spends have further slowed down to 16.6 per cent in the current financial year (FY25), following the Reserve Bank of India’s tightening of unsecured lending norms and rising delinquencies, and increased stress in the portfolio.Typically, during the festival season (September–December), credit card spends peak as several credit card-issuing banks offer discounts and cashbacks on e-commerce and other platforms. This is a reversal of trend in the past three financial years stretching to FY21 due to RBI’s restrictions.In the previous financial year (FY24), credit card spends rose by 27.8 per cent, but were low compared to FY23 which surged by 47.5 per cent. In FY22, the spending increased 54.1 per cent, according to data compiled by Macquarie Research.ICICI Bank recorded 4.4 per cent gross credit losses in its FY24 credit card portfolio as against 3.2 per cent year-on-year. SBI Cards’ credit losses in the segment stood at 7.4 per cent in FY24 and 6.2 per cent in FY23, the...
Post a Comment
Read more

SFBs should be vigilant, proactive to mitigate risks: RBI deputy guv

By
  The Reserve Bank of India’s Deputy Governor Swaminathan J on Friday instructed the directors of small finance banks (SFBs) to be vigilant and proactive in identifying emerging risks in the sector.Speaking at a conference for directors on the boards of SFBs, Swaminathan highlighted the role of governance in guiding SFBs towards sustainable growth with stability. He also emphasised the importance of sustainable business models.Additionally, he highlighted the need for strengthening cybersecurity to protect the entities against digital threats and urged for a stronger focus on financial inclusion, customer service, and grievance redressal to ensure a broader reach of banking services.Executive Directors S C Murmu, Rohit Jain, and R L K Rao, along with other senior officials representing the Supervision, Regulation, and Enforcement Departments of the RBI, also participated in the conference.   -  Business Standard  30 th  September, 2024
Post a Comment
Read more

Brigade Hotel Ventures files draft papers with Sebi for Rs 900 crore IPO

By
  Brigade Hotel Ventures Ltd, owner and developer of hotels in South India, has filed draft papers with capital markets regulator Sebi to raise Rs 900 crore through an initial public offering (IPO).The proposed IPO is entirely a fresh issue of equity shares with no Offer-for-Sale (OFS) component, according to the draft red herring prospectus (DRHP).Proceeds from the issue to the tune of Rs 481 crore will go towards payment of debt, Rs 412 crore will be allocated to the company and Rs 69 crore to its material subsidiary, SRP Prosperita Hotel Ventures Ltd.Additionally, Rs 107.52 crore will be used to purchase an undivided share of land from the Promoter, BEL, and the remaining funds will support acquisitions, other strategic initiatives, and general corporate purposes.The company may raise up to Rs 180 crore through a Pre-IPO Placement.   If the placement is undertaken, the issue size will be reduced.Brigade Hotel Ventures Ltd is a wholly-owned subsidiary of Brigade Enterprises ...
Post a Comment
Read more