In an attempt to calm nerves over Rupee’s depreciation in the past few days, Reserve Bank of India’s governor, Raghuram Rajan, stated that though majority of dollar demand from the oil marketing companies was back in the market, but on the same time also underscored that it was in no rush to taper its dollars swap window to these companies.
Further providing relief, he cited that India’s Apex Bank would choose the most appropriate solution to settle dollar swaps with oil companies when the time comes. While, the governor cited the option of rolling over some portion of the oil company dollar swaps if market conditions were unstable, he also underscored that these companies could return the dollars borrowed under the swap facility in Rupee terms. This meant that Oil Marketing Companies, without causing any disturbance to the forex markets could net off their transactions.
Additionally, referring to the recent decline in the value of rupee, Rajan pointed that there was no fundamental reason for volatility in the exchange rate. Also in attempt to shore-up currency, the governor highlighted that RBI estimates current account deficit (CAD) in 2013-14 to be much lower at $56 billion than the quantum projected earlier. Although, the government projected the CAD in the current fiscal to stand at $70 billion, the same was revised downwards to $60 billion by Finance Minister P Chidambaram on back of declining gold imports and recovery in exports.
Besides, the governor also took a heart from the narrowing trade deficit numbers and slowing of core inflation, but he also expressed worries over high food inflation by terming it as “cause for worry for central bank”. Meanwhile, delighting the bond markets, the governor announced that central bank in order to ease liquidity in the system, would buy Rs 8,000 crore of bonds from the secondary market, under the central bank’s open market operations scheme.
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