Reserve Bank of India’s measures to ease the rupee volatility should not be seen as tightening of policy rates, Union Finance Minister P Chidambaram has said. He was addressing a conclave of venture capitalists in Delhi on July 16. RBIÂ’s measures had a positive impact on the rupee on July 14, which ended at Rs 59.31 against the dollar, nearly one per cent higher than MondayÂ’s closing of Rs 59.81.
The rupee has depreciated nearly 9.5 per cent since April 1. After meeting with the Finance Minister and Ministry officials, the RBI announced a slew of measures late on Monday. These included raising the Marginal Standing Facility (MSF) rate and Bank Rate to 10.25 per cent.
It also capped the amount lent at repo rate of 7.25 per cent at about Rs 75,000 crore, and announced sale of Government bonds worth Rs 12,000 crore on July 16 under its open market operations. Repo rate is the rate of interest RBI charges on banks for short term loans.
All these measures aim to make the cost of borrowed funds higher for banks. This also indicated a hike in interest rates on deposits and advances for bank customers. These are measures that are taken to quell speculative activity and to stabilise the rupee and I am confident the rupee will stabilise, the Finance Minister said.
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