Measures to stabilise the exchange market - Notes on Reserve Bank of India

1. Periods of heightened volatility reveal the instruments and constraints of exchange-rate management. 2. This note mentions few measures (policy responses) by RBI, along with some fiscal responses to reduce the volatility in the exchange rate during crisis (depreciation). So periods of high capital inflows (appreciation of rupee) has been excluded here. 3. For crisis, these periods can be analysed: 1. India’s Balance of Payments Crisis - [1991](GoI_Budget%201992_The%20Payments%20Crisis-1991.pdf) 2. Mexican Crisis (Tequila Crisis) - December 1994 to early 1995, which impacted Mexico followed by Brazil and Venezuela 3. East Asian Crisis (triggered in Thailand, and contagion through Asia in 1997–98 in countries like Indonesia, Korea, and Malaysia) - August 1997 to September 1998 1. [Box II.5-East Asian Crisis](RBI_Reports_2010_Report%20on%20Currency%20and%20Finance-2009.pdf#page=54&selection=4,0,4,17) of 1997 in Report on Currency and Finance-2009 4. [1998](https://www.elibrary.imf.org/display/book/9781589062078/ch07.xml) - Russia’s default 5. High Capital Inflows to EMEs - 2003-04 to 2007-08 6. Global Financial Crisis - mid 2007 to late 2009 (peak phase is Sep 2008 to Mar 2009) 7. Eurozone debt crisis - 2011 to 12 8. US debt ceiling concerns and the “taper tantrum” (May–December 2013) 9. US–China trade war (2017–19)/EME outflows 10. US-Iran West Asia Conflict (March 2026) 4. ==**The RBI's measures during period of crisis can be grouped as: (WHAT & WHEN)**== 1. market intervention 2. deployment of macro-prudential and regulatory measures, like 1. modulating capital controls - encouraging inflows, and restricting outflows - capital account inflow (major) components are FPI, FDI, [ECB](ECB%20(Borrowings%20in%20Rupee%20and%20FCY).md) & Trade Credit, NRI [Deposits](Deposits%20and%20Accounts.md)-FCNR(B) and NRE-RA, and - outflows in the capital account occur through [ODI](External%20-%20Overseas%20Investments.md), outward private remittances ([LRS](Liberalised%20Remittance%20Scheme%20(LRS).md)), etc, reversal of capital flows 2. selective adjustments in current account - like revising guidelines on gold imports, etc. 3. restricting speculative trading in the exchange market through FX exposure limits, caps on limits in positions in ETCD, overall open positions, and positions in non-deliverable forwards (which are settled in USD if offered to non-residents, and in INR to residents), etc. 4. monetary measures - increase in rates and reduction in supply of systemic liquidity (and existing level of reserves) by the RBI 5. doing nothing > After the abandonment of fixed exchange rate in 1991, RBI's exchange rate policy and interventions in the forex market are not directed towards steering the exchange rate in a particular direction. It intervenes to manage or curb excessive volatility in the foreign exchange market to ensure orderly market conditions, without targeting/defending a specific exchange rate level, and thereby restores/stabilizes the market sentiments/confidence. ## Major causes of depreciation of rupee Instead of discussing factors that affect exchange rate and hence forex reserves, this section only focusses one aspect of this, viz., factors that create depreciation pressure on Rupee ### Decline in capital flows A set of external and domestic factors have contributed to decline in capital flows in the past 1. **External reasons:** 1. Several global episodes have triggered risk aversion and capital outflows from emerging markets: [^1] 1. The Asian Financial Crisis (1997) 2. Post-Pokhran II sanctions (1998) 3. Unprecedented capital inflows preceding the Global Financial Crisis (2007–08) 4. Post-Lehman financial market seizure (2009) 5. Historic downgrade of the US by S&P (August 2011) 6. Eurozone debt crisis (2011–12) 7. US debt ceiling concerns and the “taper tantrum” (May–December 2013) 8. Sharp fall in the Argentine peso (January 2014) 9. US–China trade war (2017–19)/EME outflows 10. [[COVID-19 and the RBI|The COVID-19 shock]] 11. Russia-Ukraine conflict (2022) 12. Fed tightening episode 13. *==High US dollar strength (DXY), bearish US financial conditions==* 14. Other events can be a ratings downgrade, *==foreign portfolio outflows [[Foreign Investment in India (Various Routes)#1. FPI (Debt & Equity)- Foreign Portfolio Investments|(FPIs)]]==*, elections, random walks, speculation, market sentiments, etc. 1. The experience of 1997 East Asian financial crisis showed us that any currency could come under speculative attack if its exchange rate is out of alignment with fundamentals for a prolonged period of time. 2. Such crises typically heighten global risk aversion and trigger sell-offs of assets in emerging markets. The resulting “unusually uncertain” global outlook makes it difficult for investors to make informed and optimal decisions. 3. Consequently, spillovers, due to India’s growing trade and financial integration with the rest of the world, from these external shocks often cause abrupt slowdowns, declines, or even sudden stops in capital inflows. Spillovers happen due to India’s growing trade and financial integration with the rest of the world, two indicators of which are: 1. Merchandize exports plus imports, as a proportion of GDP, 2. Ratio of total external transactions (gross current account flows plus gross capital account flows) to GDP 1. In the Indian context, this ratio has increased eight fold over last four decades, from 14 per cent in 1972 to well over 100 per cent in 2012. 2. **Domestic/Local factors** 1. Weaknesses in macroeconomic fundamentals such as higher inflation leads relatively lower returns on domestic assets (compared to competing emerging economies) reduce investor confidence. 2. Structural bottlenecks in key sectors (such as infrastructure) also deter long-term investments. 3. Policy uncertainties, for example during the debate on GAAR, have occasionally shaken investor sentiment. 4. a natural adjustment in value vis-a-vis other major foreign currencies to reflect inflation and growth differentials. 5. Other factors like government's fiscal policies, ==*expected equity market volatility (local and global)*==, etc. All these factors can reduce India’s attractiveness as an investment destination. ### Rise in CAD 1. India typically runs a persistent current account deficit (CAD), due to high import dependence especially for oil ==*(Brent)*== and gold and relatively higher inflation compared to trading partners. This means the demand for foreign currency (to pay for imports) exceeds its supply (from exports and remittances). 2. As long as this deficit is financed by stable capital inflows, the pressure on the rupee remains contained. 3. However, when capital inflows slow down or reverse, the financing gap widens, causing a sharp increase in demand for foreign exchange and leading to depreciation of the rupee. 4. Conversely, if India were running a current account surplus, a fall in capital inflows would not cause much stress on the currency. 5. Interestingly, a weaker rupee has not consistently corrected the deficit, because many of India’s imports (like oil) are price-inelastic, and export growth is often constrained during global slowdowns. 6. A circular flow can be explained as: Higher Inflation -> Reduced Export Competitiveness -> Weaker Exports + Import dependence -> Higher Import Bill -> Widening Current Account Deficit (CAD) -> Pressure on Rupee (Depreciation) -> Costlier inelastic imports (oil, gold, electronics) since exchange rate is higher -> Imported Inflation (fuel, metals, etc as inputs get expensive) -> Higher Overall Inflation (and the cycle repeats). 7. A fall in transfer payments or current receipts also worsens the CAD gap. 8. In terms of fundamentals, *inflation, interest rate differentials, balance of payments*, etc. move exchange rates. 9. A related [[Exchange Rate Policy#Factors driving exchange rate|section]] on what drives exchange rate. ## 1990-91 The rapid loss of reserves had prompted the Government of India (GoI) to take a number of counter measures in the second half of 1990-91. **Import compression:** 1. In October 1990, RBI imposed a cash margin of 50 percent on imports other than those of capital goods. Capital goods imports were allowed only against foreign sources of credit. 2. In December 1990, GoI imposed a surcharge of 25% on the prices of petroleum products except domestic gas. 3. A 25% surcharge on interest on bank credit for imports was imposed. 4. These stringent measures had the effect of forcing a considerable degree of import compression. 5. The non-oil imports came down by 23.1 percent in the April-June 1991 quarter. **Fiscal Position** 6. To improve its financial positions, the govt. had launched a sustained and multi-pronged drive against proliferation of black money 1. It improved tax compliance with help of simpler tax laws. 2. A time bound scheme permitting undeclared incomes and hidden wealth on a flat rate of tax. 7. June 6, 1990 - The 1962 Gold Control Act was abolished and superseded by the [Gold (Control) Repeal Act, 1990](https://www.indiacode.nic.in/repealedfileopen?rfilename=A1990-18.pdf) 8. The current account deficit had widened to 3.0% of GDP in 1990-91 and the foreign currency assets depleted to less than a billion dollar by July 1991. India witnessed the balance of payments [crisis](https://www.imf.org/external/pubs/ft/staffp/2002/03/pdf/cerra.pdf), also known as [payments crisis](GoI_Budget%201992_The%20Payments%20Crisis-1991.pdf), but a sovereign default was prevented. 9. ==A short note on the period of 1990s in [Exchange Rate Policy](Exchange%20Rate%20Policy.md#1990s)== ## 1997-1998 1. April-August 1997 - Due to strong capital flows, RBI had purchased around US$5.4 billion during this period. 2. Asian Crisis of 1997-98 - In July 1997, triggered by the collapse of the Thai baht after the government was forced to float it due to a lack of foreign currency reserves to maintain its peg to the U.S. dollar 3. Nov 26, 1997 - Interest rate on post-shipment rupee export credit on usance bills for a total period beyond 90 days and up to six months was increased by 2 percentage points to 15.0% per annum for the period exceeding 90 days. 4. Nov 28, 1997 - CRR cuts announced in the monetary and credit policy for the second half of 1997-98 were deferred. 5. Dec 2, 1997 - CRR on NDTL of scheduled commercial banks (excluding RRBs) was raised by 50 basis points to 10.0%. Incremental 10.0% CRR on NRE and FCNR deposit schemes was withdrawn. 6. Dec 17, 1997: 1. Banks were to charge a minimum interest rate of 20% per annum on overdue export bills. 2. An interest rate surcharge of 15% of the lending rate was imposed on bank credit for imports, effective December 18, 1997. 7. October-December 1997- Rupee had fallen by 7.6% to US dollar. ## 1998 1. January 16, 1998 1. The Bank Rate was raised from 9% to 11.0% p.a. 2. CRR on NDTL of scheduled commercial banks (excluding RRBs) was raised by 50 basis points to 10.5%, to squeeze liquidity, raise short-term (call money) interest rates, and discourage/reduce the arbitrage opportunities, that is, borrowing in the call money to take positions in the forex market. [^5] 3. General refinance to scheduled commercial banks was reduced to 0.25% of the fortnightly average outstanding aggregate deposits in 1996-97 (as against 1% earlier). 1. Export credit refinance limit for scheduled commercial banks was halved to 50% of the increase in outstanding export credit over the level of such credit on February 16, 1996, to force tighter credit conditions, and thus push faster conversion of export proceeds and curb speculative hoarding *(which was restored to 100% after normalcy returned to the forex market).* 4. Liquidity support to primary dealers via reverse repos (lending) with the Reserve Bank was made discretionary. 5. The interest rate surcharge on bank credit for imports (except export-related imports) was raised from 15% of the lending rate to 30%. 2. April 1998 1. the interest rate ceiling on FCNR(B) deposits ≥ 1 year was increased by 50 basis points and that on such deposits below one year was reduced by 25 basis points, and 2. banks were permitted to fix their own overdue interest rates in respect of FCNR(B) and NRE deposits, subject to these deposits being renewed 3. May 1998 - Weakening yen, and international reaction to the nuclear test in Pokhran, Rajasthan (May 11-13) had brought rupee under pressure. 4. [June 11, 1998](RBI_Annual%20Report_1999.pdf#page=18&selection=155,9,171,22) 1. RBI announced it readiness to sell foreign exchange in the market to meet any mismatch between demand and supply, 2. allowed FIIs to manage their exchange risk exposure by undertaking foreign exchange cover on their incremental equity investment with effect from June 12, 1998, 3. advised importers as well as banks to monitor their credit utilisation so as to meet genuine foreign exchange demand and discourage undue build-up of inventory, 4. allowed domestic financial institutions, with the Reserve Bank's approval, to buy back their own debt paper or other Indian papers from international markets, 5. allowed banks/ ADS acting on behalf of the FIIs, to approach the Reserve Bank for direct purchase of foreign exchange and 6. advised banks to charge a spread of not more than 1.5 percentage points above LIBOR on export credit in foreign currency as against the earlier norm of exceeding 2-2.5 percentage points 5. August 5, 1998 - [Resurgent India Bond (RIB)](RBI_Annual%20Report_1999.pdf#page=19&selection=177,0,185,12) was issued to raise around $5 billion. Pokhran tests led to sanctions on India putting pressure on the current account deficit. 6. [August 20, 1998](RBI_Annual%20Report_1999.pdf#page=18&selection=430,0,445,13) 1. CRR was hiked from 10.0 per cent to 11.0% (effective from fortnight starting from Aug 20, 1988) 2. Repo rate (lending to RBI) was increased from 5% to 8% 3. forward cover facilities to FIIs were enhanced 4. facility of rebooking the cancelled contracts for imports and splitting forward and spot legs for a commitment was withdrawn, and 5. flexibility in the use of Exchange Earners Foreign Currency (EEFC) accounts was allowed while restricting the extension of time limit for repatriation of export proceeds to exceptional circumstances 6. ADS were advised to report their peak intra-day positions >==[Box 1.2 - Policy Measures following the South-East Asian Currency Crisis](RBI_Annual%20Report_1998.pdf#page=17&selection=0,0,14,6#200) in RBI's Annual Report 1998== ## 2000 1. May 2000 saw a return of excess demand conditions in the foreign exchange market, mainly on account of large oil import payments and a slowdown in capital inflows. The Reserve Bank undertook net sales of US $ 1,948 million during May-June 2000 to meet temporary demand supply mismatches. 2. The Reserve Bank undertook the [[RBI_Annual Report_2000.pdf#page=5&selection=39,0,40,55|following policy actions]] on May 25, 2000: 1. an interest rate surcharge of 50 per cent of the lending rate on import finance was imposed with effect from May 26, 2000, as a temporary measure, on all non-essential imports; 2. it was indicated that the Reserve Bank would meet, partially or fully, the Government debt service payments directly as considered necessary; 3. arrangements would be made to meet, partially or fully, the foreign exchange requirements for import of crude oil by the Indian Oil Corporation; 4. the Reserve Bank would continue to sell US dollars through the State Bank of India in order to augment supply in the market or intervene directly as considered necessary to meet any temporary demand supply imbalances; 5. banks would charge interest at 25 per cent per annum (minimum) from the date the bill falls due for payment in respect of overdue export bills in order to discourage any delay in realisation of export proceeds; 6. ADs acting on behalf of FIIs could approach the Reserve Bank to procure foreign exchange at the prevailing market rate and the Reserve Bank would, depending on market conditions, either sell the foreign exchange directly or advise the concerned bank to buy it in the market; 7. banks were advised to enter into transactions in the foreign exchange market only on the basis of genuine requirements and not for the purpose of building up speculative positions. 3. In response to these measures, the rupee regained stability and traded within a narrow range of Rs.44.57-Rs.44.79 per US dollar during June 2000. ## 2007 1. [Oct 6, 2007](RBI_Circular_20071006_Exchange%20Earner's%20Foreign%20Currency%20(EEFC)%20Account-%20Liberalisation.pdf) - Government of India, permitted all exporters from October 6, 2007 to earn interest on exchange earners’ foreign currency (EEFC) accounts to the extent of outstanding balances of US$ 1 million per exporter in the form of term deposits up to one year maturing on or before October 31, 2008. 1. During 2007-08, India faced unprecedented surge in capital inflows. Sharp appreciation of the Rupee, Reserve Bank’s market operations, consequent liquidity impact and the fiscal cost of sterilization are all in recent memory. Several measures were taken such as, market intervention, consequent liquidity impact and its sterlisation ( along with incurring its fiscal cost) increase in the limits for LRS, allowing foreign companies to raise capital in India through Indian Depository Receipt (IDR), introduction of currency futures, etc. [^4] 2. *So the above are not crisis measures in times of crisis (negative shock to Rupee) but taken during the times of capital inflows.* 2. The situation changed rapidly post onset of the Global Financial Crisis (GFC), and, after some lull during 2010-11, again post US downgrade, EU crisis, etc. ## 2008 1. 2008 witnessed the most severe phase of the 2007–09 global financial crisis 2. [[RBI_Press Release_080530_Special Market Operations.pdf|May 30, 2008]] - RBI announced to buy oil bonds for foreign exchange (US dollars) 1. RBI conducted open market operations (outright or repo at the discretion of the Reserve Bank) in June-July 2008 under Special Market Operations (SMO) on an _ad hoc_ basis through designated banks, to buy the [oil bonds](https://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=18376) held by public sector oil marketing companies in their own accounts subject to an overall ceiling of Rs.1,000 crore on any single day, and provide equivalent foreign exchange through designated banks at market exchange rates to the oil companies. 2. It was more like swap facility for OMCs but through banks.. 3. Between June 5 and August 8, RBI had provided US$4.4 bn to OMCs. 3. RBI also [[Forex Market Interventions and Sterilisation#^7c87fa|sold]] foreign exchange to augment supply in the domestic foreign exchange market to meet any demand-supply gaps. 4. [September 16](RBI_Circular_20080916_Interest%20Rates%20on%20Non-Resident%20(External)%20Rupee%20(NRE)%20Deposits%20and%20FCNR(B)%20deposits.pdf), 2008 - In order to address the impact of slow down in capital flows, the interest rate ceilings were increased 1. The interest rate ceiling on FCNR (B) deposits of all maturities was increased, with immediate effect, by 50 basis points, i.e., to LIBOR/ SWAP rates (on the respective foreign currencies for the corresponding maturities) minus 25 basis points. 2. The interest rate ceiling on NR(E)RA for 1-3 years maturity was increased, with immediate effect, by 50 basis points, i.e., to LIBOR/SWAP rates plus 50 basis points. 5. [Liberalisation of ECB Policy - September 22, 2008](RBI_Circular_20080922_External%20Commercial%20Borrowings%20Policy%20-%20Liberalisation.pdf) 1. Borrowers in infrastructure sector were allowed to avail ECB up to US$ 500 million per financial year as against US\$100 million for Rupee expenditure under the Approval Route. Borrowings in excess of US$ 100 million were required to have a minimum average maturity of 7 years. 6. [FCEB Scheme - September 23, 2008](RBI_Circular_20080923_Issue%20of%20Foreign%20Currency%20Exchangeable%20Bonds%20Scheme,%202008.pdf) 1. FCEB Scheme, 2008 has been operationalised with effect from September 23, 2008. Foreign Currency Exchangeable Bond means a bond expressed in foreign currency, the principal and interest in respect of which is payable in foreign currency, issued by an Issuing Company and subscribed to by a person who is resident outside India, in foreign currency and exchangeable into equity share of another company (offered company), in any manner, either wholly, or partly or on the basis of any equity related warrants attached to debt instruments. The FCEB may be denominated in any freely convertible foreign currency. 7. [Liberalisation of ECB Policy - October 8, 2008](RBI_Circular_20081008_External%20Commercial%20Borrowings%20Policy%20-%20Liberalisation.pdf) 1. On a review of ECB policy and to promote development of mining, exploration and refinery sectors in the country, the definition of infrastructure for the purpose of availing ECB has been expanded to include mining, exploration and refining. Accordingly, the infrastructure sector henceforth is defined as (i) power, (ii) telecommunication, (iii) railways, (iv) road including bridges, (v) sea port and airport, (vi) industrial parks, (vii) urban infrastructure (water supply, sanitation and sewage projects) and (viii) mining, exploration and refining. 8. [[RBI_Press Release_081015_RBI announces further measures for improving domestic and foreign currency liquidity.pdf|October 15, 2008]] 1. The [[RBI_Press Release_081015_Overseas Foreign Currency Borrowings by Authorised Dealer Banks - Enhancement of limit.pdf|limit]] on overseas borrowing by AD Category – I banks was doubled. 1. With a view to providing greater flexibility to AD Category-I banks in seeking access to overseas funds, AD Category-I banks were permitted to borrow funds from their Head Office, overseas branches and correspondents and overdrafts in Nostro accounts up to a limit of 50 per cent of their unimpaired Tier-I capital as at the close of the previous quarter or US$ 10 million (or its equivalent), whichever is higher, as against the existing limit of 25 per cent (excluding borrowings for financing of export credit in foreign currency and capital instruments). 2. Interest Rates on Deposits 1. [October 15, 2008](RBI_Circular_20081015_Interest%20Rate%20on%20FCNR(B)%20Deposits.pdf) - The interest rate ceilings on FCNR (B) and NR(E)RA term deposits were increased by 50 basis points each, to Libor/Swap rates plus 25 and Libor/Swap rates plus 100 respectively. 2. Interest rates on dollar and rupee deposits kept in Indian banks by non resident Indians are capped by the RBI (counter-cyclical approach) in times of inflows in order to prevent hot money flows. 3. [External commercial borrowings $ECBs$](ECB%20(Borrowings%20in%20Rupee%20and%20FCY).md) 1. External commercial borrowings (ECBs) up to US $ 500 million per borrower per financial year were permitted for rupee expenditure and/or foreign currency expenditure for permissible end-uses under the automatic route. 2. The all-in-cost ceiling for ECBs for average maturity period of three years and up to five years was enhanced to 300 basis points above LIBOR and to 500 basis points above LIBOR for ECBs over five years. 4. Systemically important non-deposit taking NBFCs (NBFCs-ND-SI) that were not otherwise permitted to resort to overseas borrowing were allowed to raise short term foreign borrowings 5. HCFs - As a temporary measure, RBI allowed housing finance companies (HFCs) registered with the National Housing Bank (NHB) to raise short-term foreign currency borrowings under the approval route, subject to their complying with prudential norms laid down by the NHB. 9. [Oct 22, 2008](RBI_Circular_20081022_External%20Commercial%20Borrowings%20Policy-%20Liberalisation.pdf) - External Commercial Borrowing policy was liberalised 10. [Trade Credit - October 27, 2008](RBI_Circular_20081027_Trade%20Credits%20for%20Imports%20into%20India%20–%20Review%20of%20all-in-cost%20ceiling.pdf) - The all-in-cost ceiling for [trade credit](https://www.rbi.org.in/commonman/english/scripts/FAQs.aspx?Id=1999) less than 3 years was enhanced to 6 months LIBOR plus 200 basis points. 1. As the domestic importers are experiencing difficulties in raising trade credits within the existing all-in-cost ceilings in view of the tight liquidity conditions in the International credit markets, an enhancement of the all-in-cost ceiling for trade credit was announced in the Mid-term review of Annual Policy Statement for the year 2008-09. 11. [[RBI_Press Release_081107_Swap facility for providing Forex Liquidity to Indian Banks for their Overseas Branches:Subsidiaries.pdf|FX Swap Facility - November 7, 2008]] - RBI announced a [forex swap](Forex%20Swaps.md) facility with a three month tenor, to Indian public and private sector banks (having overseas branches or subsidiaries) to help them manage their short-term funding requirements at their overseas offices. 1. This acted as a strong comfort to such banks in the context of the drying up [[RBI_Speech_20090629_Usha Thorat- Impact of global financial crisis on Reserve Bank of India (RBI) as a national regulator .pdf|(Usha Thorat, 2009)]] of the overseas money markets. 2. Further, for funding the swap facility, banks were allowed to borrow under the LAF for the corresponding tenor at the prevailing repo rate. RBI was also prepared to consider any specific relaxation of SLR requirement for the purpose. 3. [Feb 5, 2009](https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=20019) - This forex swap facility of tenor up to three months was extended to March 31, 2010. 12. [Nov 15, 2008](RBI_Press%20Release_20081115_RBI%20Announces%20Further%20Measures%20for%20Liquidity%20Management%20and%20Improving%20Credit%20Flow.pdf) - RBI Announces Further Measures for Liquidity Management and Improving Credit Flow 1. Extension of period of entitlement on export credit - Taking into account the difficulties faced by exporters, as orders got cancelled and receivables mounted, the period of entitlement (period eligible for concessional interest, like a rate window) of the first slab of pre- shipment rupee export credit and post-shipment rupee export credit (which was available at a concessional interest rate ceiling of the benchmark prime lending rate (BPLR) minus 2.5 percentage points) was extended by 90 days each to 270 days (with effect from November 15, 2008) and 180 days (on [[RBI_Press release_081128_Rupee Export Credit Interest Rates-Extension of period of credit.pdf|November 28, 2008]] w.e.f from December 1, 2008) till April 30, 2009, respectively. 1. [April 28, 2009](RBI_Press%20Release_20090428_Interest%20Rate%20Ceiling%20on%20Rupee%20Export%20Credit.pdf) - It was extended till October 31, 2009. 2. [October 28, 2009](RBI_Circular_20081028_Interest%20Rate%20Ceiling%20on%20Rupee%20Export%20Credit.pdf) - It was extended to April 30, 2010. 2. Standing Liquidity Facility (SLF) by RBI for ECR 1. The quantum of export credit refinance [[Exports & The RBI.md#|ECR facility]] available to banks from the RBI was also increased to improve credit delivery, by an increase in the eligible limit of the ECR facility for scheduled banks (excluding RRBs) from 15 per cent (fixed in 2001) to 50 per cent of the outstanding export credit eligible for refinance. 2. In 2001, the quantum of ECR limit was fixed at 15.0 per cent of the outstanding rupee export credit eligible for refinance as at the end of the second preceding fortnight. 3. Buyback (Prep) of FCCBs 1. RBI allowed pre-mature buyback of FCCBs to allow corporates to taking advantage of the discount on their outstanding [[FCCB Crisis - 2008-12|FCCBs]]. 2. Taking advantage of the discount on Foreign Currency Convertible Bonds (FCCBs) issued by Indian companies in overseas markets, they were allowed to prematurely buy back their FCCBs at prevailing discounted rates. On account of the global developments, FCCBs issued by Indian corporates were currently trading at a discount. There is a benefit to the company concerned as well as to the economy if corporates buy back the FCCB at the prevailing discounted rates. In view of these potential benefits, RBI considered proposals from Indian companies to prematurely buy back their FCCBs. The buy back had to be financed by the company's foreign currency resources held in India or abroad and/or out of fresh external commercial borrowing (ECB) raised in conformity with the current norms for ECBs. Proposals in this regard were considered under the approval route. Extension of FCCBs were permitted at the current all-in cost for the relative maturity. 4. [[RBI_Press Release_081015_RBI announces further measures for improving domestic and foreign currency liquidity.pdf|Interest Rates on Deposits]] - The interest rate ceilings on FCNR (B) and NR(E)RA term deposits were increased by 75 basis points each to to Libor/Swap rates plus 100 basis points, and to Libor/Swap rates plus 175 basis points respectively. 1. FCNR (B) Deposits - It was increased from Libor/Swap rates for the corresponding maturities minus 75 basis points before September 16, 2008 for the respective foreign currencies by 175 basis points, i.e., to Libor/Swap rates plus 100 basis points by [November 15, 2008](RBI_Annual%20Report_2009.pdf#page=207&selection=3,1,3,40) 2. NR(E) RA Deposits - The interest rate ceiling on [NR(E) RA](Deposits%20and%20Accounts.md#Accounts%20in%20India) for one to three years maturity was increased from Libor/Swap rates for US dollar of corresponding maturity before September 16, 2008 by 175 basis points, i.e., to Libor/Swap rates plus 175 basis points by November 15, 2008. 3. Thus interest rates on both were increased by 175 bps since September 16, 2008. 13. [November 28, 2008](RBI_Press%20Release_20081128_RBI%20Announces%20Further%20Measures%20for%20Liquidity%20Management%20and%20Improving%20Credit%20Flow.pdf) 1. Forex swaps facility of tenors up to three months, which was available on request, will be made available up to June 30, 2009. 14. [Dec 6, 2008](RBI_Press%20Release_20081206_RBI's%20Growth%20Stimulus.pdf) - 'RBI's Growth Stimulus' 1. [December 8, 2008](RBI_Circular_20081208_Rupee%20Export%20Credit%20Interest%20Rates%20–%20Interest%20on%20overdue%20export%20bills.pdf) - It was announced by the Governor in his statement titled 'RBI's Growth Stimulus' on [Dec 6, 2008](RBI_Press%20Release_20081206_RBI's%20Growth%20Stimulus.pdf) that the prescribed interest rate as applicable to post shipment rupee export credit (not exceeding BPLR minus 2.5 percentage points) was extended to overdue bills up to 180 days. 2. [Dec 8, 2008](RBI_Circular_20081208_Buyback%20:%20Prepayment%20of%20Foreign%20Currency%20Convertible%20Bonds%20(FCCBs).pdf) - RBI liberalised the procedure for buyback of FCCBs announced on November 15, 2008, and started considering applications both under the automatic and approval routes, and directed the entire procedure of buyback should be completed by the Indian Companies by March 31, 2009. >==[Box II.27 Policy Response of the Reserve Bank since mid-September 2008 ](RBI_Annual%20Report_2009.pdf#page=165&selection=92,0,93,60) in Annual Report-2009== >[Box V.2 Policy Measures to Augment Forex Liquidity](RBI_Reports_2010_Report%20on%20Currency%20and%20Finance-2009.pdf#page=221&selection=41,0,41,46) in Report on Currency and Finance-2009, dated July 1, 2010 ## 2009 1. [Feb 5, 2009 - Further Measures taken by RBI](RBI_Press%20Release_20090205_Further%20Measures%20taken%20by%20RBI.pdf) 1. The foreign exchange swap facility (introduced on November 7, 2008) was extended till March 31, 2010 2. Export credit in foreign currency 1. In order to facilitate banks financing of export credit in foreign currency to exporters, RBI raised ceiling rate on export credit in foreign currency from LIBOR + 100 basis points to LIBOR + 350 basis points 2. correspondingly the ceiling interest rate on the lines of credit with overseas banks was also increased from 6-month LIBOR/EURO LIBOR/EURIBOR + 75 basis points to 6-month LIBOR/EURO LIBOR/EURIBOR + 150 basis points. 2. [March 13, 2009](RBI_Circular_20090313_%20Buyback%20:%20Prepayment%20of%20Foreign%20Currency%20Convertible%20Bonds%20(FCCBs).pdf) - The March 31, 2009 deadline set on Dec 8, 2008 was extended to December 31, 2009 3. April 21, 2009 1. Further liberalisation of the FCCBs buyback policy was announced. 2. The increased limit for export credit refinance under SLF for banks was extended up to March 31, 2010. 4. [April 28, 2009](RBI_Circular_20090428_Buyback%20:%20Prepayment%20of%20Foreign%20Currency%20Convertible%20Bonds%20(FCCBs).pdf) - Procedure for buyback of FCCBs was liberalised further 5. **Summary (2008-09)- Flexibility in foreign currency borrowing** 1. ECB - raised the interest rate ceilings and the end-use restrictions were relaxed (which were tightened during capital flows of 2007) 2. NRI Deposits - raised the interest rate ceilings on FCNR(B) and NR(E)RA deposits, 3. Export Credit Scheme - raised the interest rate ceilings on export credit in foreign currency and on credit lines with overseas banks; 4. AD-Category I Banks - allowed Indian banks to borrow more funds from their overseas branches and correspondent banks; 5. NBFCs-ND-SI and HFCs - permitted them to raise short-term foreign currency borrowings, under the approval route ## 2011 **August 2011** 1. Global factor: 1. The historic downgrade of USA by S&P in August 2011 that triggered heightened risk aversion and sell-off of assets of emerging economies including India by the foreign institutional investors. 2. The risk aversion environment has further heightened on rising euro-zone concerns and falling global growth. 2. Local factors: 1. The weakness in macro-economic fundamentals, 2. bottleneck issues relating to infrastructure and 3. concerns over implementation of GAAR 4. and growth prospects of competing economies, have dented India’s appeal as an investment destination leading to further fall in capital inflows. 3. [November 18, 2011](https://www.sebi.gov.in/legal/circulars/nov-2011/increase-in-fii-debt-limit-in-government-and-corporate-debt-category_21124.html) 1. 4. Limits on investment in debt securities comprising government securities and corporate bonds by foreign institutional investors were enhanced; 4. [Nov. 23, 2011](https://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=25469) 1. The all-in-cost ceiling for External Commercial Borrowings (ECBs) was rationalized; 1. RBI allowed Indian firms to raise foreign loans at higher interest rates by removing the cap on the interest cost. ECB proceeds could be retained abroad only if there is an expense in foreign currency. Rest, thad to be credited into rupee accounts immediately. 5. [Nov. 23, 2011](https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=6838&Mode=0) 1. On the same day, to attract higher NRE deposits and FCNR (B) deposits, RBI allowed banks to offer higher rates on them. It changed the upper limit from 175 bps on Libor/Swap to 275 bps points on same. 6. [Dec. 15, 2011](https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=6872&Mode=0) ^0c8503 1. RBI took slew of measures related to forex trading to curb speculation. 1. **Net Overnight Open Position Limits (NOOPL) of the Authorized Dealer (AD) banks were reduced across the board 1. It [reduced](https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=6872&Mode=0) net overnight open position limits (NOOPL) of banks and informed them individually. 2. What is [Net Overnight Open Position(NOOP)](https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=10485) ? For each foreign currency, the bank computes its **net open position** as: (a) net spot position, (b) net forward position (includes futures, swaps or any unsettled spot), and (c) net options position (OTC+exchange, and delta-equivalent). If an option delta is hedged using spot/forward positions that are _already_ counted, it must **not** be double counted. All derivative transactions are adjusted to the present value. 3. This is done separately for every currency and gold. Some currencies will show a net long exposure and some will be net short. 4. Each currency’s exposure is then converted into INR. Two groups are created: the sum of all INR long (negative INR) exposures , the sum of all INR short (positive INR) exposures. 1. If the bank owns/holds a foreign currency now or is it about to receive it, it is a positive position (**+**). 2. If the bank owes a currency now or it has to pay it out in future because it is a debt or short position, it is a negative position (**-**). 3. Example - If a bank has a forward position as long 10 EURUSD, and short 10 USDAUD, that is 10 units each, then open position in each currency is EUR=+10, USD=-10, USD=-10. So total EUR=+10, USD=-20, AUD=10, and in INR terms assuming exchange rate as 1 EUR=+100 INR, 1 USD= INR 80, 1 AUD = INR 60 then EUR=+1000 INR, USD=-1600 INR, AUD=+600. 4. So Total long (+) INR = 1600, and total short (-) INR is 1600. 5. ==Overall NOOP = max { total INR-long bucket, total INR-short bucket }. This is known as the shorthand method internationally. If a bank has offshore branches, their NOOP is computed the same way. The bank’s final NOOP = onshore NOOP + offshore NOOP (No netting between onshore and offshore.)== 6. Thus, NOOP represents the maximum rupee exposure the bank carries because of the unhedged if the INR moves sharply in either direction. 1. Note - For NOP-INR (where Rupee is one of the currencies), RBI requires netting of long and short positions in INR. So the formula is onshore {sum of INR longs (negative INR) − sum of INR short (positive INR)} + offshore INR positions. The higher of "long or short" method is not used here. In NOP-INR, only the INR legs of INR-linked FX contracts are counted .We ignore the foreign currency legs. 2. **Intra-day open position / daylight limit of Authorised Dealers should not exceed the existing NOOPL approved by the RBI** 1. RBI allows banks a certain intra-day open position limit (higher than the overnight limit) so they can manage customer orders actively through the day. It was noticed that this flexibility given to banks for fixing their intra-day limits, which were in many cases, significantly higher than their net overnight open positions limits, were often being used for building up speculative positions and taking a directional bet on Rupee. 2. Though banks typically maintain “open” positions as part of their trading book of their derivative portfolio and these positions engender market risks for the banks, usually client trades are typically covered on a back-to-back basis by banks in the inter-bank market, implying that the banks are hedged as far as market risks on client related transactions are concerned but they continue to hold on to the credit risks arising from the exposure to their clients. 3. On May 10, 2012, it was increased to 5 times the NOOPL. 4. ==The **format for reporting of net open position limits** was updated in [Feb 17, 2026](RBI_Press Release_20260217_RBI releases draft Directions on Foreign Exchange Dealings of Authorised Persons.pdf) - draft Directions on Foreign Exchange Dealings of Authorised Persons. The revised format is placed at [Annex II](https://rbidocs.rbi.org.in/rdocs/content/pdfs/DRAFTFED17022026_A2.pdf).== 3. **Disallowed the cancellation and rebooking of forwards** ^0c8511 1. It banned companies and FPIs to re-book forward contracts (where Rupee was one of the currencies) if cancelled, all cash/tom/spot transactions to be done for actual delivery and cannot be cancelled or cash settled. 2. The facilities given to corporates by way of cancellation and re-booking of their forward contracts and booking of forward contracts under past performance criterion were also not being used in the right spirit (used for speculation). 3. Derivatives were used as instruments for generation of profit rather than as instruments for risk mitigation 1. **Why cancellation and rebooking forwards were restricted?** 1. It was observed from the various transactions undertaken by corporates with banks *that the turnover of transactions increased during volatile periods* and most of the increase was on account corporates undertaking a hedge and reversing the same intra-day. While undertaking a hedge in a volatile market stands to reason, reversing it on the same day does not in any way reflect the medium to long term view of the corporate, any position undertaken to take advantage of the one way movement intensifies the move adding to the demand / supply pressures in the market [^1]. 2. Another reason the high volumes surprised RBI was the practice or a trait that the corporates would often leave their foreign exchange exposures unhedged to benefit from the movement of the currency in their favour and save the cost of hedging rather than hedging and concentrating on their core business to generate profits. 3. Now earlier cancellation and subsequent rebooking were allowed for all transactions undertaken to hedge current account exposures and capital account exposures up to one year. This flexibility was allowed for the corporate to dynamically manage the foreign exchange risk the corporate was exposed to depending on the medium to long term view of the corporate on the currency movements and not to speculate on the intra-day volatility 2. **Reduction in limits for booking forward contracts under past performance route and only on fully deliverable basis;** 1. The past performance facility was made available to corporates to enable them to plan their foreign currency exposures. 2. Given the Rupee’s strength in recent history (though not very recent), Indian importers generally stay unhedged or have a very small hedge ratio. Even corporates who have both import and export exposures prefer to have their import exposures unhedged while almost fully utilizing their export exposures. Now the past performance facility was made available to corporates in addition to the facility based on actual exposures so as to allow them to plan ahead for managing their foreign currency exposures. It was seen that both facilities, together amounted to almost double the exposures of the corporates and without any delivery mandate on either, which could be /was used for speculative purpose. 3. **But why corporates should not engage in gains by speculation?** 1. Reserve Bank believes that corporates should be concentrating more on their core business to generate returns rather than looking to generate alpha/profit from diversifying into trading in forex markets. As my fellow Senior colleague, Mr V K Sharma, Executive Director aptly observed, and I quote, "risk management is not about eliminating, or which is the same thing as completely hedging risk, but about first determining, like one’s pain threshold, risk tolerance threshold and then aligning an entity’s existing risk, be it currency, interest rate or commodity price risk, with its risk tolerance threshold. Having said that it would also be in order to have a sense of how risk itself is defined and measured. Risk is uncertainty of future outcomes such as cash flows. In financial theory and practice, it is typically measured by annualised standard deviation of a time-series of percentage changes in asset prices. While courting financial risks in pursuit of financial returns is the staple and dharma of banking and finance industry, it is not so for industrial and manufacturing businesses! The staple and dharma of business and industry is courting their normal core business risks in pursuit of delivering a market-competitive return on equity to shareholders". There cannot be a better advice for the Corporates trying to come to grips with the "new normal" in the changed financial market realities. [^1] 2. It is therefore not only in the interest of market stability but also corporate balance sheet that the derivative products are used more responsibly for risk containment, more so on account of the increased volatility in the markets, so that they serve the purpose they were designed for. 3. Rollovers were allowed - It provide the corporate flexibility to alter the tenor of the hedge depending on the liquidity of the tenor, view on the forward premia, availability of pricing and also to match the tenor of the transaction to that of the underlying exposure in case delayed payments, uncertain maturity date (for ex. hedge taken in case of past performance) etc 4. All that RBI did was curbing the scope available for taking speculative bets on the Rupee that resulted in enhanced volatility 5. The measured did help achieve the intended policy objectives and also led to an immediate fall in the volumes of the markets. 6. The actual hedging requirements of the real sector, however, were not left unattended as we subsequently relaxed some of the measures to accommodate customer needs. 2. There was an appreciation of 1.1 per cent in Rupee-USD pair during 2010-11. > A short history on [deregulation of interest rates on deposits in India](Deregulation%20of%20Interest%20Rates%20on%20Deposits.md) ^ad361c ## 2012 1. The trade balance deteriorated despite depreciation of the rupee mainly due to relatively price inelastic nature of some of India’s imports, as well as a slowdown in exports reflecting falling global demands. As a result, the current account deficit (CAD) significantly widened during FY 2012-13 to touch the high of 4% of GDP. 2. There were large decline in capital flows. 3. The above two factors—widening of CAD in the backdrop of large decline in capital flows—exerted severe downward pressure on Rupee with consequent volatility. 4. [May 4, 2012](https://rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=7178) 1. The ceiling rate _on export credit in foreign currency was deregulated with effect from May 5, 2012. 2. By being able to charge the rates freely, banks raised or borrowed more foreign currency abroad profitably, increasing the availability of foreign currency loans(like PCFC) for exporters. This reduced domestic USD demand, thereby easing pressure on the rupee. 3. Earlier exporters also availed pre-shipment credit in rupees (EPC) and then convert drawals into PCFC (but at the discretion of the bank). 5. [May 10, 2012](https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=7196&Mode=0) 1. It is well-known fact that speculative forces tend to be self-reinforcing and often result in a situation where exporters keep on deferring their receipts and staying unhedged and importers rush in to hedge and buy forwards, thus aggravating the situation in hand. 2. RBI thus asked exporters to convert 50% of the balances in their [EEFC](https://www.rbi.org.in/commonman/english/scripts/FAQs.aspx?Id=11) accounts with [ADs](https://rbi.org.in/scripts/FAQView.aspx?Id=54#1) into rupee balances and credited into rupee accounts within a fortnight. Also, they could buy dollars only after using the US dollar deposits in their accounts. This was done to bring in supply of dollars in the inter-bank market and prevent exporters from “hoarding” dollars in hope of further fall in rupee. It also meant that India was not fully convertible on “capital accounts” 1. On [July 31, 2012](https://rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=7483), the erstwhile stipulation of allowing credit of 100 per cent foreign exchange earnings was restored subject to certain conditions, such as, the total of the accruals in the account during a calendar month should be converted into Indian Rupees (still prevented dollar hoarding) on or before the last day of the succeeding calendar month after adjusting for utilization of the balances for approved purposes or forward commitments. 6. [May 21, 2012](RBI_Notification_20120521_Risk%20Management%20and%20Inter%20Bank%20Dealings.pdf) ^b14c19 1. Positions taken by banks in currency futures/options cannot be offset by undertaking positions in OTC market 1. [June 20, 2014](RBI_Notification_20140620_Risk%20Management%20and%20Inter-bank%20Dealings-%20Guidelines%20relating%20to%20participation%20of%20Residents%20in%20the%20Exchange%20Traded%20Currency%20Derivatives%20(ETCD)%20market.pdf) *(Reversal)* - Proprietary trading in ETCD market was allowed within banks’ net open position limit and any limit imposed by the exchanges on June 20, 2014. 2. ==NOOPL will not include positions taken by banks on the exchanges.== 3. This separate limit for banks for ETCD (currency futures and options) was USD 100 million or 15 percent of the outstanding open interest of the exchange, whichever is lower 7. The Indian Rupee fell by more than 12% during 2011-12. 8. [[RBI_Press Release_120625_RBI announces Further Liberalisation Measures for Capital Account Transactions.pdf|25, June 2012]] 1. RBI announced "Further Liberalisation Measures for Capital Account Transactions", wherein policies related to FII investment in G-secs and long-term infrastructure bonds were revised. 1. FII investment in G-Secs was increased by USD 5 billion, that is, from USD 15 billion to USD 20 billion. 9. [July 31, 2012](RBI_Notification_20120731_Risk%20Management%20and%20Inter%20Bank%20Dealings.pdf) *(Partial Reversal of Dec 15, 2011)* ^bd568f 1. RBI decided to allow exporters to cancel and rebook forward contracts to the extent of 25 percent of the contracts booked in a financial year for hedging their contracted export exposures. 2. RBI decided to permit AD Category I banks to exclude their Net Options Position and the positions taken by the overseas branches from their NOOPL, for positions involving Rupee as one of the currencies, and accordingly, limits for such positions, within the overall NOOPL, may be separately fixed by the respective bank’s board and communicated to the Reserve Bank for approval. >[!tip] In the H2 of 2013-2014, RBI had announced slew of currency defence measures, and had tightened monetary policy by raising rates, after Federal Reserve indicated that it would slow down its easing program. ## 2013 >[!cyan] > 1. [Jan 14, 2013](RBI_Press%20Release_20130114_Swap%20Facility%20for%20Expansion%20of%20Export%20Credit%20in%20Foreign%20Currency.pdf) - INR-USD swap facility with the Reserve Bank was provided to SCBs (except RRBs) to support incremental Pre-shipment export credit in foreign currency, with the option to access rupee refinance to the extent of swap with the RBI under Special Export Credit Refi nance Facility (SECRF), till June 28, 2013. > 2. [January 24 2013](https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=7823&Mode=0) > 1. FII investment [[RBI_Press Release_130124_Foreign investment in India by SEBI registered FIIs in Government securities and corporate debt.pdf|limits]] was increased by USD 5 billion, that is from USD 20 billion to USD 25 billion for government Securities, and from USD 45 billion to USD 50 billion for corporate debt. > 3. [March 1, 2013](RBI_Notification_20130301_%20Risk%20Management%20and%20Inter-Bank%20Dealings.pdf) - RBI withdrew the restrictions placed on [[Measures to stabilise the exchange market#^0c8503|December 15, 2011]] on open position limits involving Rupee as one of the currencies. > 4. May 22, 2013 - the US Federal Reserve Chairman Bernanke hinted of a possible beginning of the end of quantitative easing (QE) > 1. This lead to the hardening of long-term bond yields in the US and other advanced economies which increased their attractiveness, prompting foreign investors to pull funds out of riskier emerging markets, which had received large capital inflows in search of higher yields, pushed by ultra-accommodative monetary policies in major advanced economies (AEs). > 2. This upsurge in US long-term treasury yields triggered large selloffs by the FIIs, especially in the bond market lead to heightened volatility of Rupee in line with other EME currencies. > 3. With this portfolio debt investments reversal on flight to safety, the Indian Rupee became one of the worst performers during the period from the second half of May 2013 to August 2013. > 4. The more important cause was the existence of weak macro-economic fundamentals. > 1. GDP growth rate (4.5 per cent in 2012-13 and 4.4 per cent in Q1 of 2013-14) > 2. high level of inflation (average CPI and average WPI inflation of 10.2 per cent and 7.4 per cent respectively in 2012-13) > 3. and large fiscal deficit (4.8 per cent of GDP in 2012-13). > 5. India’s external environment also worsened which was amply reflected in the deterioration in various external sector vulnerability indicators between end-March 2011 and end-March 2013. > 1. The external debt to GDP ratio increased from 18.2 per cent to 22.0 per cent. > 2. Import cover of reserves, which stood at 9.5 months at end-March 2011 declined sharply to about 7.0 months at end-March 2013. > 3. The CAD-GDP ratio deteriorated from 2.8 per cent to 4.7 per cent during the period. > 5. June 19, 2013 - the Fed provided more explicit forward guidance on moderating its asset purchases in measured steps starting later in the year, and unwinding QE by mid-2014. > 6. The rupee had already depreciated from 55.04 (RBI reference rate) on May 21, 2013 to 58.74 by then. > 7. It crossed the market’s psychological resistance level of 60 per US dollar in the first week of July. > > 8. [March 1, 2013](RBI_Notification_20130301_Risk%20Management%20and%20Inter-Bank%20Dealings.pdf) *(Reversal)* > 1. Restrictions placed on open positions limit of the Authorised Dealers involving Rupee as one of the currencies, (on both overnight and intra-day open positions) dated ==[Dec 15, 2011](#^0c8503), [May 21, 2012](#^b14c19) and [July 31, 2012](#^bd568f) was withdrawn, except for some instructions.== > > 9. **Feb 6, 2013** - the RBI [released](https://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=28088) the [[RBI_Report_20130206_Working Group on Issues Related to Gold Imports and Gold Loan NBFCs in India.pdf|Report]] of the Working Group to Study the Issues Related to Gold Imports and Gold Loan NBFCs in India (Chairman: Shri K.U.B. Rao). > 1. At that time, nominated banks and agencies were permitted to import gold under multiple financing arrangements like loan basis, supplier’s credit/buyer’s credit, consignment basis, and unfixed price basis. > 2. The Working Group noted that a _large portion of gold imports by nominated banks was on a consignment basis_, under which banks did not have to fund the imports themselves. This created an uneven playing field vis-à-vis other imports and weakened the disciplining role of financing costs in moderating gold demand. > 3. Accordingly, the Group recommended aligning gold import regulations with those applicable to other imports, so that gold imports would also require *funding and carry normal trade-finance discipline.* > > 10. **May 13, 2013** - Acting on the group's recommendations, the RBI issued [directions](https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=7977&Mode=0) to restricting the import of gold on consignment basis by (only banks) but permissible only to meet the genuine needs of exporters of gold jewellery. > > 11. **June 4, 2013** - To further discourage non-essential imports and thereby tackle the issues of widening current account deficit (CAD), [RBI extended](https://www.rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=8020) the directions of May 13, 2013: > 1. It restricting imports of gold on consignment basis even by nominated agencies/premier/star trading houses who have been permitted by govt. to import gold but permissible only to meet needs of jewelry exporters. > 2. It was further decided that all Letters of Credit (LC) to be opened by Nominated Banks / Agencies for import of gold under all categories will be only on 100% cash margin basis. This is because importers were still using LCs with deferred payment (DA), effectively availing short-term credit and boosting gold imports. > 3. Further, all imports of gold will necessarily have to be on Documents against Payment (DP) basis. Accordingly, gold imports on Documents against Acceptance (DA) basis will not be permitted. This killed the credit element even if the LCs existed. > 1. Documents against Payment (D/P): Shipping documents are released to the importer only after immediate payment, so the exporter is paid before the goods are taken delivery of. > 2. Documents against Acceptance (D/A): Shipping documents are released against acceptance of a bill for future payment (by promising to pay later) , giving the importer (credit period) short-term credit. > 4. These restrictions would however not apply to import of gold to meet the needs of exporters of gold jewellery. > 5. This showed that move was aimed to moderate the demand for gold for domestic use while safeguarding export activity. > > 12. **June 5, 2013:** > 1. Customs duty on gold imports was increased from 6% to 8%. > > 13. **July 8, 2013** > 1. RBI [barred](https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=8225&Mode=0) banks from trading in exchange traded currency futures and options (ETCD). They could trade in them only for their clients. > 1. [June 20, 2014](RBI_Notification_20140620_Risk%20Management%20and%20Inter-bank%20Dealings-%20Guidelines%20relating%20to%20participation%20of%20Residents%20in%20the%20Exchange%20Traded%20Currency%20Derivatives%20(ETCD)%20market.pdf) (Reversal) - Proprietary trading in ETCD market was allowed within banks’ net open position limit and any limit imposed by the exchanges on June 20, 2014. > 2. July 8, 2013 - SEBI reduced open position limits of clients and non-bank trading members, increased margins by 100% on currency derivatives. This was done to prevent excessive “speculative” trading on exchanges as it was leading to further fall in rupee in the spot market. > 3. The following [paper](https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/1_FCP010411.PDF) by RBI analyzes the impact of futures trading on spot prices. > > 14. **June 12 , 2013** > 1. The [limit](https://rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=8033) for foreign investment in Government dated securities (for ) with USD 5 billion to USD 30 billion with immediate effect. > 2. The enhanced limit of USD 5 billion was made available only for investments in Government dated securities by long term investors registered with SEBI – Sovereign Wealth Funds (SWFs), Multilateral Agencies, Pension/ Insurance/ Endowment Funds, Foreign Central Banks > > 15. **July 15, 2013** > 1. 3 specific monetary [measures](RBI_Press%20Release_20130715_RBI%20announces%20Measures%20to%20address%20Exchange%20Rate%20Volatility.pdf) were announced to tighten liquidity conditions: > 1. The Marginal Standing Facility (MSF) rate was increased (and thus also Bank Rate) to 10.25%, that is policy repo rate+300bps. > 1. Reversal - The interest rate corridor was realigned to normal policy operations by end-October 2013 > 2. The allocation of funds under the LAF was limited to 1.0 per cent of the NDTL subject to an overall cap of Rs 750 billion. > 3. It announced OMO sales of Rs 12000 crore. > > 16. **July 18, 2013** > 1. RBI did an [OMO sales](https://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=29113) of Rs 2,532.00 crore. > > 17. **July 22, 2013** > 1. 80-20 scheme: All nominated banks and other entities were asked to ensure that at least [20 per cent](https://rbi.org.in/scripts/NotificationUser.aspx?Id=8252&Mode=0) of every lot of gold import was exclusively made available for exports. > 2. Prohibition of import of gold in the form of coins and medallions. By August 14, 2013, RBI had imposed > > 18. **[July 23, 2013](RBI_Press%20Release_20130723_RBI%20announces%20Additional%20measures%20to%20address%20Exchange%20Market%20Volatility.pdf)** > 1. The minimum daily CRR balance maintenance was [increased](https://rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=8263) to 99% from 70% owing to steep fall in rupee. > 1. Reversal - Daily CRR requirement was reduced to 95 per cent w.e.f September 21, 2013. > 2. As an additional [measure](https://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=29140) of monetary policy tightening to contain volatility in rupee, repo under LAF was further restricted to 0.5% of bank’s NDTL outstanding as on the last Friday of the second preceding fortnight, effect immediately, i.e., from July 24, 2013. > 3. Capping of primary dealers’ access to LAF at 100 per cent of their individual net owned funds. > > **MSF emerged as the effective policy rate** > 1. Various measures, as stated above, like the caps on access to the LAF window and an increased the minimum daily CRR requirement (initially to 99 per cent from 70 per cent, and thereafter to 95 per cent) contributed to the ==tightening of the domestic liquidity situation.== > 2. The immediate objective was to raise the short-term interest rates (that is keep money market condition tight) to: > 1. increase the cost of speculation > 2. and prevent narrowing of the spread that could have accelerated [[RBI_Annual Report_2014.pdf#page=55&selection=74,28,75,15|debt]] outflows given that FII debt flows are found to be particularly sensitive to monetary policy variables. > 3. The measures, state above, helped to substantially achieve this as evidenced by the money market rates anchoring to the marginal standing facility (MSF) rate of 10.25 per cent, which was policy rate+300 bps > 4. ==With this, the MSF rate became the [effective policy rate](RBI_Annual%20Report_2014.pdf#page=80&selection=28,46,30,20) during this period, and operating objective was to contain the operating interest rate target, that is call rate, around the MSF rate. It is to be noted that the repo rate was not raised by 300 bps.== > > 19. **August 8, 2013 - Forex Swap Window to OMCs** > 1. RBI announced a forex [swap window](https://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=29423)for PSU OMCs, which was opened with effect from August 28, 2013 to directly provide them dollars. > 2. This was meant to reduce the OMCs' demand for dollars in the open market, thereby easing pressure on the Rupee. > 3. Under the swap facility, Reserve Bank undertook sell/buy USD-INR forex swaps for fixed tenor with the three public sector oil marketing companies (IOC, HPCL and BPCL) through a designated bank. > 4. They needed around $8-8.5 billion/month every month to pay for oil imports. > 5. It was a purely temporary dollar lending arrangement to OMCs. > 6. The swap window did attract a fair amount of criticism from the perspective of execution of the second leg. > 7. But RBI can now look back at these temporary arrangements with a sense of satisfaction of restoring confidence and stability in the foreign exchange market and India’s external sector outlook. > 8. After December 2013, oil companies sourced their entire dollar demand from market. [^3] > 20. **August 13, 2013:** > 1. Customs duty on gold imports was increased from 8% to 10%. > > 21. **August 14, 2013** > 1. *Exemption from CRR and SLR:* On [August 14, 2013](https://rbidocs.rbi.org.in/rdocs/notification/PDFs/CFC14082013N.pdf), banks were advised that with effect from fortnight beginning August 24, 2013, incremental FCNR (B) deposits as also NRE deposits with reference base date of July 26, 2013, and having maturity of three years and above, mobilised by banks was exempted from maintenance of CRR and SLR. This facility was available for deposits mobilized up to March 7, 2014. > 2. *No cap on NRE (Rupee deposits):* To pass on this benefit, on [August 14, 2013](https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=8311&Mode=0), banks were freedom to offer interest rates on such deposits without any ceiling up to February 28, 2014. The extant ceiling on NRO Accounts was not changed. > 1. Interest rates on Non-Resident (External) Rupee (NRE) deposits and Non-Resident Ordinary (NRO) accounts were already de-regulated in [December 2011](https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=6904). But there was a cap on rates. > 2. *Reversal* - With effect from March 1, 2014, the interest rate ceiling was revert to the position prior to August 14, 2013, i.e. interest rates offered by banks on NRE deposits cannot be higher than those offered by them on comparable domestic rupee deposits. > 3. [No cap on FCNR(B) deposits:](https://rbi.org.in/scripts/NotificationUser.aspx?Id=8310&Mode=0)The interest rate ceiling on deposits held in foreign currency non-resident (banks) {FCNR(B)} of maturity 3-5 years was enhanced on the same day by 100 bps to LIBOR/SWAP plus 400 bps. > 1. The ceiling was restored to LIBOR/SWAP plus 300 bps after February 28, 2014. > 4. [Master Direction](https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=12825#20) - Reserve Bank of India (Interest Rate on Deposits) Directions, 2025 > 5. [Gold](https://rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=8312): RBI announced the prohibition of import of gold in the form of coins and medallions, and other restrictions on gold imports. > 1. 20/80 scheme - 20% of every lot of import of gold imported to the country is exclusively made available for the purpose of exports and the balance for domestic use. It was withdrawn on [November 28, 2014](https://rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=9370). > 6. **Overseas Direct Investments:** > 1. To [[RBI_Press Release_130814_RBI announces measures to rationalise Foreign Exchange Outflows by Resident Indians_RBI.pdf|moderate the forex outflows]] by resident Indians by [[External - Overseas Investments|ODIs]], the limit on financial commitments by an Indian party for making ODIs was reduced from 400 per cent of their net worth (as on the date of the last audited balance sheet) to 100 per cent under the automatic route with effect from [August 14, 2013](https://rbi.org.in/Scripts/NotificationUser.aspx?Id=8305&Mode=0) which was subsequently restored in July 2014 with stability returning to the foreign exchange market. > 1. ODI limit was restored to 400 per cent in July 2014. > 2. Also any financial commitment exceeding US$ 1 billion in a financial year would require prior approval of the Reserve Bank. > 7. **LRS Scheme** > 1. Under [[External - Overseas Investments#Liberalised Remittance Scheme (LRS)|LRS scheme]], there was a [[Liberalised Remittance Scheme for Resident Individuals- Reduction of limit from USD 200,000 to USD 75,000_RBI_14082013.pdf|reduction]] of limit from USD 200,000 to USD 75,000. > 2. Use of LRS for acquisition of immovable property outside India directly or indirectly was prohibited. > 1. Limit under LRS scheme was enhanced to US$ 125,000 without end use restrictions (except for prohibited transactions) in June 2014 > > 22. **August 20, 2013** > 1. Extant regulations required banks to bring down their SLR securities in held to maturity (HTM) category from 25 per cent to 23 per cent of their NDTL in a progressive manner in a prescribed time frame. The requirement stood at 24.5 per cent as at end-June 2013. It was decided to relax this requirement by allowing banks to retain SLR holdings in HTM category at 24.5 per cent until further instructions. In addition, banks were allowed to spread over the net depreciation, if any, on account of mark to market (MTM) valuation of securities held under available for sale (AFS)/held for trading (HFT) categories over the remaining period of the financial year in equal installments. > 2. The above step was taken as the hardening of long term yields had resulted in banks incurring large mark-to-market (MTM) losses in their investment portfolio. Since these MTM losses are partly resulting from abnormal market conditions and could be expected to be largely recouped going forward, the Reserve Bank had decided to provide the above prudential adjustments for a limited period. > > 23. **August 23, 2013** > 1. It was also important for RBI to ensure that the: > 1. liquidity tightening does not harden longer term yields sharply and > 2. adversely impact the flow of credit to the productive sectors of the economy. > 2. In pursuance of these two objective, it did an OMO purchase of 62.3 billion. > 3. August 28, 2013 - From the level of 55.4 per US dollar on May 22, 2013 (53.78 on May 3), Rupee depreciated sharply by around 19.4 per cent against the US dollar to a historic low of 68.85 per US dollar on August 28, 2013. > > 24. **August 30, 2013** > 1. RBI did an OMO purchase of 62.3 billion. > > 25. **July/August/September 2013** ^201308 > 1. On [August 8, 2013](https://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=29275), the RBI, in consultation with the government, announced the auction of cash management bills (CMBs) of 220 billion every week, as a measure to contain the volatility in the foreign exchange market. The issuances were aimed at draining out liquidity in the short-end of the market spectrum. These measures helped in keeping the money market conditions tight, with money market rates rising to around the MSF rate (that is 300 bps higher than the repo rate). > > 26. **May to August 2013 (Intervention)** > 1. Spot-The Reserve Bank made net sales to the tune of US$ 10.8 billion in the forex market during the period May-August 2013. > 2. Forward-The RBI also intervened in the forward market resulting in doubling of net forward liabilities to US$ 9.1 billion as at end-August 2013 from US$ 4.7 billion in July 2013. [^2] > > 27. **September 4, 2013** > 1. ECB norms were [liberalised](RBI_Notification_20130904_External%20Commercial%20Borrowings%20(ECB)%20from%20the%20foreign%20equity%20holder.pdf) making it available for general corporate purposes. > 28. **September 19, 2013** > 1. With a view to strengthening foreign capital inflows in the infrastructure sectors: > 1. the definition of the infrastructure sector was expanded for the purpose of availing ECBs; > 2. NBFCs - asset finance companies were permitted to avail of ECBs under the automatic/approval routes to finance the import of infrastructure equipment for leasing to infrastructure sectors; and > 3. the ECB limit for NBFCs – infrastructure fi nance companies was raised from 50 per cent to 75 per cent of their owned funds, including the outstanding ECBs under the automatic route, and beyond 75 per cent of their owned funds under the approval route and their hedging requirement for currency risk was reduced from 100 per cent to 75 per cent of exposure. > > 29. **September 4, 2013 to November 30 2013 - Forex Swap Window** > 1. Bankers had [[The Independence of the Central Bank(Dr. Raghuram G. Rajan, Governor - September 3, 2016 - at St. Stephen's College, New Delhi)#^46cdb6|suggested to RBI]] they could bring plenty of dollars in as FCNR(B) 3 year deposits if they could get cheaper forwards. > 2. On September 4, RBI had announced a special [[Forex-Special Swap Window - FCNR (B) Deposits (2013)|swap window]] for attracting FCNR (B) dollar funds. RBI Notification [(1](https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=29480) and [2](https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=8388&Mode=0)\). > 3. A special swap/forward rate to banks was offered if they raised fresh FCNR (B) deposits/dollar funds for at minimum tenor of 3 years over at a fixed rate of 3.5 per cent per annum for the tenor of the deposit. It was a buy/sell $ swap between RBI and banks. In the first leg, banks would raise these deposits from non-residents and RBI would buy these dollars in return for rupees. In the second leg, RBI would return the dollars at a discounted forward rate of only 3.5% p.a. Given the historical returns on various assets in India, banks found it to be a very attractive deal and raised $30 bn within a few days. > 4. Also, the extant overseas borrowing limit of 50 per cent of the unimpaired Tier I capital was raised to 100 per cent and borrowings mobilised under this provision can be swapped with the RBI at a concessional rate of 100 bps below the ongoing swap rate prevailing in the market. > 5. The scheme was open up to November 30, 2013. > 6. This concessional swap facility as an exceptional measure with the broader public policy objective of bolstering the forex reserves for strengthening Bank’s market intervention capability. > 7. The special forex swap facilities along with enhancement in their overseas borrowing limits led to forex inflows in excess of US$ 34 billion that aided in restoring stability of the Rupee. > 8. This measure along with restrictions on gold imports restored confidence in the markets immediately. > 9. **Criticism for forex swaps** - Both the swap window (under FCNR(B) and temporary dollar lending arrangement to OMCs) did attract a fair amount of criticism from the perspective of execution of the second leg but thankfully the Reserve Bank can look back at these temporary arrangements with a sense of satisfaction of restoring confidence and stability in the foreign exchange market and India’s external sector outlook. [^2] > > 30. **October 2013:** > 1. With fall in CAD along with increase in capital flows, Rupee made a smart recovery in September-October 2013. > 2. With the return of stability in the forex market, a calibrated unwinding of exceptional monetary and administrative measures of July 2013 was undertaken from September 2013 onwards. > 3. However, increasing inflationary pressures and the possible impact on the long term valuation of the rupee, warranted a shift in the policy stance beginning October 2013. > 4. In view of the (i)upturn in inflation and (ii)elevated inflation expectations and (iii)in order to avert the adverse impact of low real rates on financial savings, the repo rate was raised by 50 bps during September-October 2013. > > > ### Summary of key measures by RBI since May 2013: > 31. **Forex market intervention**, > 1. special concessional swap window for fresh longer term FCNR (B) deposits and banks’ overseas borrowings, > 2. opening of special dollar swap window for the PSU oil companies, > 3. net sales to the tune of US$ 10.8 billion in the spot forex market during the period May-August 2013. > 4. net sales in forward market resulting in doubling of net forward liabilities to US$ 9.1 billion as at end-August 2013 from US$ 4.7 billion in July 2013. > 32. **Monetary Policy** - monetary tightening through reduction in banks’ access to overnight LAF, increase in MSF rate and increase in daily minimum CRR maintenance requirements and administrative measures > 1. Exceptional liquidity measures to contain volatility and their quick withdrawal helped restore stable market conditions in a sustainable way by September 2013 > 2. The experience with managing exchange market pressures in 2013-14 underscores the relevance of monetary policy as an instrument of exchange rate stabilisation. > 3. Even though in normal times, monetary policy may not pursue any exchange rate objective and allow market fundamentals in terms of interest rate differentials and inflation differentials to condition the path of exchange rate. > 33. **Trade Policy -** import compression of non-essential items like gold, > This in particular led to sharp reduction in CAD and increase in capital inflows. > 34. **Capital Flow Management** > 1. increase in overseas borrowing limit of banks > 2. bringing of outward FDI flows to the approval route, > 3. reduction in Liberalised Remittance Scheme (LRS) entitlement, > 4. disallowing banks from carrying proprietary trading in exchange traded derivatives, etc. > > An article on **Monetary Policy Response to Exchange Market Pressures** in the [[RBI_Annual Report_2014.pdf#page=77&selection=28,0,28,53|Annual Report-2014]] 2. On December 18, 2013, the Feds announced the commencement of tapering by the US Fed starting from January 2014. 3. After the subsequent announcements about the increase in its pace, the Rupee has generally remained stable, which indicates that the markets have broadly shrugged off QE tapering fears. 4. Still the daily volatility (annualised) of Rupee during the period from January 1 to September 30, 2014 remained at 5.9 per cent as against 1. South African Rand (11.5%), 2. Brazilian Real (10.8%), 3. Turkish Lira (10.6%), 4. Russian Rouble (9.9%) and 5. Indonesian Rupiah (6.9%) 5. In terms of point-to-point variation, Rupee has marginally appreciated by about 0.5 per cent during the above period, while other currencies have witnessed depreciation, _viz._ 1. Russian Rouble (16.9%), 2. South African Rand (7.4%), 3. Turkish Lira (5.8%) and 4. Brazilian Real (3.4%). 6. The contagion effect of sharp fall in Argentine Peso against the US dollar in the second half of January 2014 also did not have any major impact on the Rupee. Even the recent geo political crises in Ukraine, Iraq and Gaza did not have any significant impact on the Indian financial markets. This has led to some analysts describing Indian Rupee as the most agile out of the fragile currencies of EMEs. ## 2014 1. Jan 2014 1. The contagion effect of sharp fall in Argentine Peso against the US dollar in the second half of January 2014 also did not have any major impact on the Rupee. 2. [April 1, 2014](RBI_MPS_201404_1.pdf#page=6&selection=96,28,102,46) 1. Investments by FPIs in treasury bills were banned and only allowed in G-Secs with residual maturity of one year and above. This was done to prevent the volatility in interest rate and currency market. 3. Geopolitical crises in Ukraine, Iraq and Gaza did not have any significant impact on the Indian financial markets, making Indian Rupee the most agile out of the fragile currencies of EMEs. 4. Few events of 2014 that supported Rupee: 1. improvement in macroeconomic fundamentals like fiscal deficit (due to government’s continued commitment to fiscal consolidation), 2. formation of a new Government with clear mandate *(political stability)*, 3. reduction in short-term external debt *(external position)*, 4. sustained decline in oil prices *(current account)*, 5. sharp increase in forex reserves (*balance of payments surplus*) 5. As the exchange rate started trading in a stable manner, between July 2014 to Sept 2014, [several forex restrictions](https://rbi.org.in/scripts/BS_SpeechesView.aspx?Id=919#:~:text=Box%3A%20Recent%20measures%20for%20easing%20certain%20foreign%20exchange%20restrictions) were withdrawn. >==Box III.1-Monetary Policy Response to Exchange Market Pressures in the [[RBI_Annual Report_2014.pdf#page=77&selection=28,0,28,53|Annual Report-2014]]== ## 2015 1. Sept. 29, 2015 1. RBI announced the [guidelines](https://www.rbi.org.in/scripts/FS_Notification.aspx?Id=10049&fn=5&Mode=0) for the issuance of Rupee-denominated bonds overseas under the External Commercial Borrowings (ECB) Policy. 2. It was for the rupee-denominated bonds issued by local firms in overseas markets. Indian borrowers will therefore not incur any currency risk. In 2018, withholding tax on masala bonds was removed to make it more attractive for investors. 3. The term "Masala Bonds" was used by the [International Finance Corporation (IFC)](http://www.ifc.org/wps/wcm/connect/corp_ext_content/ifc_external_corporate_site/about+ifc), a member of the World Bank group, for its 10 year rupee bonds issued, to raise funds for supporting private sector infrastructure development initiatives in India. 4. They trade on [London Stock Exchange](http://www.londonstockexchange.com/home/homepage.htm). 2. [Nov. 5, 2015](https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=10095&Mode=0) 1. RBI introduced the first tranche of [sovereign gold bond scheme](https://m.rbi.org.in/Scripts/FAQView.aspx?Id=109) to reduce imports of physical gold for investment purposes. Gold imports form a good share of imports thus a drag on rupee. ## 2016 1. February 22, 2016 - Rupee ended at 68.6 against the US dollar. ## 2018 1. June 6, 2018 - The policy repo rate was raised by 25 bps to 6.25 per cent. 2. June 28, 2018 - Rupee hit an all-time low of 68.9 against US dollar. 3. August 1, 2018- The policy repo rate was increased by 25 bps to 6.50 per cent. 4. [September 17, 2018](https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=1546434&reg=3&lang=2), the govt. announced exemption from withholding tax (that is reduction from 5% to 0%) to Interest Income on specified offshore rupee-denominated bonds (Masala Bonds). 5. [September 19, 2018](https://rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=11375) 1. It was decided to liberalise some aspects of the ECB policy with the objective of easing the constraints of manufacturing sector for raising capital from overseas, by allowing to raise ECB up to USD 50 million or its equivalent with minimum average maturity period reduced to 1 year from 3 years. 2. To improve liquidity in secondary market for rupee denominated bond, Indian banks were allowed to participate as arrangers/underwriters/market makers/traders in RDBs issued overseas subject to applicable prudential norms. 6. [October 3, 2018](https://rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=11384) - In order to have easier access to foreign currency borrowings in view of their high import requirements, public sector oil marketing companies (OMCs) were permitted to raise ECB for working capital purposes with minimum average maturity period (MAMP) of 3/5 years from all recognised lenders under the automatic route. 7. October 11, 2018 - The rupee touched an all-time intra-day low of 74.49 per US dollar on October 11, 2018. 8. November 6, 2019 - The minimum average maturity requirement for ECBs in infrastructure space was reduced to 3 years to make it easier to raise funds. 9. November 26, 2018 - Mandatory hedging for infrastructure ECBs to be reviewed/relaxed to reduce dollar demand for hedging. 10. Major causes for decline in 2018: 1. Tariffs by US on Chinese imports 2. Higher oil prices 3. Global interest rates and strengthening of dollar ## 2019 1. **External Commercial Borrowings** 1. [Jan 16, 2019](https://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=46031) - RBI announced the New [[ECB (Borrowings in Rupee and FCY)|External Commercial Borrowings (ECB)]] Framework ![[RBI_Image_20190116_New Policy Framework for External Commercial Borrowings (ECB).png|550]] Source - Annual Report of the RBI 2018-2019 2. [February 07, 2019](https://rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=11472) -ECB facility for Resolution Applicants under Corporate Insolvency Resolution Process was relaxed. 1. [July 30, 2019](https://rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=11636) - End-use Provisions were rationalised 3. Gold - July 6, 2019 - FM Nirmala Sitharaman, in her Budget speech, announced an increase in customs duty on gold to 12.5% (+3% on BCD+3% I-GST ~ 16.26%) from 10%. It was further hiked to 15% in July 2022. 4. [February 15, 2019](https://rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=11475) - FPI limits - The 20% single-corporate exposure (concentration) limit in their portfolio was withdrawn. But they still not hold more than 50% of any issue of a corporate bond. 5. August, 2019 - Rupee came under pressure in August 2019 after China allowed its currency to depreciate to a decade low level. ## 2020 1. Article [Managing Exchange Rate Volatility in the Time of COVID-19](RBI_Monthly_Bulletin_Article_20201224_%20Managing%20Exchange%20Rate%20Volatility%20in%20the%20Time%20of%20COVID-19.pdf) in RBI's Monthly Bulletin-Dec 2020 ## 2022 1. [July 6, 2022](RBI_Press%20Release_20220706_Liberalisation%20of%20Forex%20Flows%20(Revised).pdf) - RBI announced measures for Liberalisation of Forex Flows (Revised). 1. 1. Exemption from Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) on Incremental FCNR(B) and NRE Term Deposits 2. Upper limit on Interest Rates on FCNR(B) and NRE Deposits was removed. 3. Foreign Currency Lending by Authorised Dealer Category I (AD Cat-I) Banks - To facilitate foreign currency borrowing by a larger set of borrowers who may find it difficult to directly access overseas markets, overseas foreign currency borrowing (OFCB) was allowed to be used for lending to other than exporters. 4. Changes to the regulatory regime relating to FPI investment in debt flows were made 5. The limit under the automatic route for ECBs raised from US$ 750 million or its equivalent per financial year to US$ 1.5 billion 2. Article ==[Exchange Rate Volatility in Emerging Market Economies](RBI_Monthly_Bulletin_Article_20220818_%20Managing%20Exchange%20Rate%20Volatility%20in%20the%20Time%20of%20COVID-19.pdf) in RBI's Monthly Bulletin-Aug 2022== It is imperative to understand that unlike countries with current account surpluses, India generally has a sizeable quantum of current account deficit. The exchange rate of Indian Rupee remains susceptible to ebb and flow of external capital, especially outflows during periods of stress. ## 2023 >==[Box V.2 - Effectiveness of the Reserve Bank Measures in Containing INR Volatility](RBI_Annual%20Report_2023.pdf#page=145&selection=153,0,153,71) in RBI's Annual Report-2023== ## 2025 1. Rupee fell to a new life-time low of 91.07 (intraday) on Dec 16, 2025. ## 2026 1. [Feb 9, 2026](RBI_Notification_20260209_Foreign%20Exchange%20Management%20(Borrowing%20and%20Lending)%20(First%20Amendment)%20Regulations,%202026.pdf) - RBI notified FEM(Borrowing and Lending) (First Amendment) Regulations, 2026 and rationalized borrowing limits (allowing up to 300% of net worth), expanded the list of eligible Indian borrowers and recognized global lenders, and crucially removed rigid cost-of-borrowing ceilings for certain trade credits and ECBs. 2. [March 27, 2026](RBI_Notification_20260327_NOP-INR%20position%20of%20Authorised%20Dealers.pdf) - Limit on Banks’ Onshore Rupee Net Overnight Open Position (NOOP) 1. RBI strictly ordered Authorised Dealer (AD Cat-I) banks to cap their Net Open Position in Rupees (NOP-INR) to USD 100 million by the end of each business day within the onshore deliverable market. 2. This replaced the previous, highly flexible system where banks could decide this limit, not exceeding 25% of their total (Tier-1 and Tier-2) capital 3. It forced banks to dramatically unwind large outstanding dollar positions, stripping out speculative hoarding 4. Daylight limit was not changed 5. It had taken similar measure on [Dec 15, 2011](#^0c8503) which was withdrawn on [March 1, 2013](#^201308) 3. [April 1, 2026](RBI_Notification_20260401_Risk%20Management%20and%20Inter-Bank%20Dealings%20(Revised).pdf) 1. Applicable with immediate effect, RBI barred ADs (AD Category-1 banks and Standalone Primary Dealers (SPDs) holding a Category-III license) to offer Rupee NDDCs (Non-deliverable foreign exchange derivative contract involving Rupee) to both resident and non-resident users, for all purposes, to manage the [volatility](Measures%20to%20stabilise%20the%20exchange%20market.md#2026) in the exchange rate arising from the speculative trading in onshore & offshore (that is, by non-residents and residents respectively) non-deliverable rupee forex derivatives. 2. Additionally, RBI completely barred the [rebooking of cancelled forex derivative contracts](#^0c8511) involving INR, whether deliverable or non-deliverable, including forex derivative transactions (deliverable or cash-settled) involving INR executed with related global parties. 4. [April 20, 2026](RBI_Notification_20260420_Risk%20Management%20and%20Inter-Bank%20Dealings.pdf) - RBI decided to withdraw the instructions on April 01, 2026, except for few instructions. 5. May 12, 2026 - Govt hiked duty on [gold](Non-Monetary%20Gold%20and%20the%20RBI.md#2026) and silver, along with other items. ## Summary of Measures ^ddbe2a > [!quote] > The key to the maintenance of a realistic and a stable exchange rate is containing inflation through macro-economic policies and ensuring net capital receipts of the scale not beyond the expectation. >*–High Level Committee on Balance of Payments (Chairman: Dr. C. Rangarajan, 1993)* The above statement captures both sides of BoP as exchange rate stability ultimately depends on both current and capital account balances. 1. current account - maintaining external competitiveness by containing inflation, while also managing import dependence, particularly on inelastic items like oil, 2. capital account - keeping capital flows stable and within sustainable limits. However there are various factors that can disrupt these accounts. 3. In ideal world, there may not be balance in both accounts simultaneously. A deficit/surplus in one account financed/absorbed by surplus/deficit in another account can also keep rate stable. In India's case, current account deficit is largely financed by surplus capital flows (or reserve drawdown in times of net capital outflows). 4. So depending upon [[Exchange Rate Policy#Factors driving exchange rate|factors]] that drive the change in exchange rate, the central bank and govt. may take various measures. 5. **This is a summary of responses by RBI when Rupee is under the depreciation pressure:** ^569d8e 1. **Market Interventions** - The first line of defence is ==market interventions== like (in times of pressure on rupee) - *a reason to hold reserves*. These are sales and purchases of foreign currency through a few select state run ADs (banks/agent banks), basically to even out lumpy demand or supply in the thin forex market; large lumpiness in demand is mainly on account of oil or defense imports, leads and lags, external debt servicing, portfolio outflows, or speculative trades. It supplies foreign exchange (US dollar) in the market by: 1. Selling dollars in the *inter-bank spot market*, 2. Selling dollars in the exchange-traded currency futures (ETCD), onshore forwards (if premia is high, say due to importers' demand) or occasionally in offshore [[NDF - Non-deliverable Forwards (involving Rupee)|NDF]] markets (usually before the opening of onshore market), especially after 2019. 3. [[Forex Swaps|forex swaps (both short and long tenors)]] - between the RBI and the AD-Category I banks 1. a SELL/BUY swap, like the one in [March 2020](https://www.rbi.org.in/commonman/english/scripts/PressReleases.aspx?Id=3178)to supply dollar liquidity to the banks (or we say to provide liquidity to the foreign exchange market), 2. a special SELL/BUY swap with oil marketing companies [(OMCs)](https://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=29423), as in 2013, to directly provide dollars to them. 3. a BUY/SELL swap, like the swap window of [[Forex-Special Swap Window - FCNR (B) Deposits (2013)|September 2013]] to attract FCNR(B) Dollar Funds -RBI Notification [(1](https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=29480) and [2](https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=8388&Mode=0)) to bolster the nation's overall foreign exchange reserves for the period of the swap (and sterilise its previous dollar sales) and signal its ability to supply dollars in times of outflows in future, and push down the forward premium. 4. It is to be noted that such swaps do not alter the level of forex reserves in a durable/structural way, and rather are primarily tools of management of rupee liquidity (durable and transient) in the inter-bank market. 4. a *forward-over-forward* transaction to smooth distortions in the forward premium curve (for instance, if 1-month premiums rise sharply relative to 3-month ones), thereby reducing volatility. Since it has no spot leg, it does not affect rupee liquidity. 5. a combination of above like selling in *spot + BUY/SELL swap*, 6. *a special market operations ([SMO](https://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=18376))* wherein it would buy govt. securities like oil bonds from OMCs (as collateral or outright) to supply dollars. 7. only *announcements* to manage expectations 8. By markets, we can classify them as: 1. onshore OTC (where foreign exchange derivatives can be deliverable or non-deliverable) - spot, forwards (including swaps of short and long tenors), ~~options~~ 2. offshore OTC - non-deliverable forwards (NDF), and they are settled in FCY like dollars 3. onshore ETCD - currency futures 9. **Effectiveness of intervention** - RBI intervention is most effective when markets are thin, stressed, one-sided, and illiquid, and not when they are deep and balanced. With this, RBI lets portfolio investors share currency risk. In other words, in times of outflows, RBI considers various variables to time its intervention to make it very effective like: 1. net open positions (one-sided short INR / long USD), 2. order flow/turnover (weak/thin) - even small RBI dollar sales can move USDINR sharply, so fewer dollars are needed. 3. bid-ask spreads (wide which happens when one-sided positions dominate and dollar supply is limited) 4. share of interbank trades (low) - When market depth is weak; intervention punches harder. 10. Related Data releases in [Monthly Bulletin](https://rbi.org.in/Scripts/BS_ViewBulletin.aspx) 1. Sale/Purchase of U.S. Dollar by the RBI 2. Maturity Breakdown (by Residual Maturity) of Outstanding Forwards of RBI (US$ Million). 11. **Challenges:** 1. The impossible trinity comes into play: the interventions affect the rupee liquidity and may lead to a conflict with the monetary policy stance. 2. And sometimes, particularly when the Rupee depreciates, there is a limitation to the extent of intervention, rendering intervention strategically ineffective. 3. Sterilisation carries a cost. 12. When RBI intervenes in derivatives, it does not change the supply of reserve money until settlement. 13. Example of such data - [Table 2.2: Reserve Bank’s Intervention in the Foreign Exchange Market between 1995-96 to 2008-09](RBI_Research_DRG_20100225_Exchange%20rate%20policy%20and%20modelling%20in%20India.pdf#page=27&selection=22,0,23,27) 2. The second line of defence is resorting to ==modulating the capital control regime, along with current account restrictions and other measures==: diluting or strengthening restrictions on outflows depending on whether the Rupee is appreciating or depreciating. Some of the macro-prudential and regulatory measures (some are taken by RBI & Govt. together), like 1. capital controls-encouraging inflows, and restricting outflows 1. capital account inflow components are FPI, FDI, [ECB](ECB%20(Borrowings%20in%20Rupee%20and%20FCY).md) & Trade Credit, NRI [Deposits](Deposits%20and%20Accounts.md)-FCNR(B), NRE-RA Relaxing ECB & trade credits regime for corporates, Reviewing and relaxing periodically the investment limits for FPIs in debt and equity, FDI ownership in different sectors, Issuance of sovereign bonds to raise dollars from overseas investors. But the RBI has been reluctant owing to foreign exchange risks during repayment. 2. restricting outflows occur through [ODI(outflows)](External%20-%20Overseas%20Investments.md), and foreign investors withdrawing their previous investments (capital flight/reversal). 1. Measures to restrict capital outflows often have to be very strict, and intense, or else they are unlikely to be effective in preventing capital outflows when fear of a sharp fall of asset prices and resulting instability of financial institutions grips investors. 2. Such intense controls on outflows then send a "bad signal" which can discourage foreign investments in later years. 3. Even if these controls are withdrawn in short-time due to a quick reversal in the forex market conditions, decision making by economic agents can be adversely affected due to policy uncertainty for businesses, foreign investors etc. 4. Hence the challenge is they must be used as a last resort 2. selective adjustments in current account - like revising guidelines on gold imports, etc. 3. Third is restricting speculative trading in the exchange market through FX exposure limits, caps on limits in positions in ETCD, restricting netting of positions of ETCD in OTC markets and vice vera, net intraday and overnight open positions having INR as one of the currencies (and sometimes even for cross currency pairs), and positions in non-deliverable forwards (which are settled in USD if offered to non-residents, and in INR to residents) for residents and non-residents, etc. 4. Fourth is ==monetary measures by RBI== *like tightening rupee liquidity* in the system by 1. raising repo rates, 2. reducing the supply of central bank liquidity by putting strict limits on borrowed reserves (LAF ceilings), 3. further absorbing system liquidity through OMO bond sales and thereby increasing the effective money market interest rates, and making it highly unprofitable for speculators to bet against Rupee (or short the Rupee), 4. and attracting fresh capital flows due to higher yields on fixed-income like bonds and deposits. 5. Fifth is ==to do nothing== - If there is a limitation to the extent and impact of intervention, RBI can also let the exchange rate be market determined but it would risk severe fall in exchange rate and volatility in other financial markets. It may be good news for some sector but bad for others like a *Dutch Disease* syndrome. ## Related Notes 1. [[Five Years of Leading the Reserve Bank - Looking Ahead by Looking Back - A speech by Dr. Duvvuri Subbarao, ex-RBI Governor|Five Years of Leading the Reserve Bank]] - Looking Ahead by Looking Back - A speech by Dr. Duvvuri Subbarao, ex-RBI Governor 2. [Measures to stabilise the exchange market](Measures%20to%20stabilise%20the%20exchange%20market.md) ## Related data releases 1. Sale/Purchase of U.S. Dollar by the RBI in [Monthly Bulletin](https://rbi.org.in/Scripts/BS_ViewBulletin.aspx) 2. Maturity Breakdown (by Residual Maturity) of Outstanding Forwards of RBI (US$ Million) in [Monthly Bulletin](https://rbi.org.in/Scripts/BS_ViewBulletin.aspx) 3. [[WSS - Weekly Forex Reserves|WSS - Forex Reserves]] 4. [[Half-Yearly Report of Forex Reserves|Half-Yearly Report of Forex Reserves]] 5. [[Annual Reports|Annual Report]] ## References 1. Dr. Y.V. Reddy. (1997, August 15). Exchange Rate Management : Dilemmas \[Inaugural Address\]. XIth National Assembly Forex Association of India at Hotel Cidade De Goa. [Link](https://rbi.org.in/scripts/BS_SpeechesView.aspx?Id=231) | [pdf](RBI_Speech_19970815_Exchange%20Rate%20Management%20-%20Dilemmas_Y.V.Reddy.pdf) 2. RBI. (1998). *Box 1.2 - Policy Measures following the South-East Asian Currency Crisis*. RBI's Annual Report 1998 3. Usha Thorat. (2009, June 29). *Impact of global financial crisis on Reserve Bank of India (RBI) as a national regulator*. 56th EXCOM Meeting and FinPower CEO Forum organised by APRACA, Seoul, 29 June 2009. [[RBI_Speech_20090629_Usha Thorat- Impact of global financial crisis on Reserve Bank of India (RBI) as a national regulator .pdf|pdf]] 4. RBI. (2009, Aug 27). *Annual Report (2008-09)*. [Link](https://rbidocs.rbi.org.in/rdocs/AnnualReport/PDFs/I1RAR080809.pdf)| [pdf](RBI_Annual%20Report_2009.pdf) 5. RBI. (July, 2010). *Report on Currency and Finance 2008-09*. [pdf](RBI_Reports_2010_Report%20on%20Currency%20and%20Finance-2009.pdf) 6. RBI. (November 2010). [Discussion paper](https://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=2344) on deregulation of savings bank deposit interest rates. 7. G. Padmanabhan. (2011, Sept. 13). *Forex Market Development – Issues and Challenges – Thoughts of a Returning Forex Market Regulator.* \[Speech\]. RBI Bulletin. [Link](https://rbi.org.in/scripts/BS_ViewBulletin.aspx?Id=12508#F0) | [[RBI_Speech_20110913_Forex Market Development – Issues and Challenges – Thoughts of a Returning Forex Market Regulator_G. Padmanabhan.pdf|pdf]] 8. Harun R. Khan. (2012, May 10). *Musings on FEDAI, Forex Market and Indian Rupee* \[Speech\]. 7th Annual Conference 2012 of FEDAI at Zurich. RBI. [Link](https://rbi.org.in/scripts/BS_ViewBulletin.aspx?Id=13221) | [[RBI_Speech_20120510_Musings on FEDAI, Forex Market and Indian Rupee_RBI.pdf|pdf]] 9. PIB-Press Information Bureau. (2012, May 11). *Interest rate on NRIs deposits*. Ministry of Finance, Govt. of India. [Link](https://www.pib.gov.in/newsite/PrintRelease.aspx?relid=83651) 10. RBI. (2012, July 2). Master Circular on Interest Rates on Rupee Deposits held in Domestic, Ordinary Non-Resident (NRO) and Non-Resident (External) (NRE) Accounts. [Link](https://www.rbi.org.in/commonman/english/scripts/Notification.aspx?Id=1066#7) | [[RBI_Master Circular_120702_ Master Circular on Interest Rates on Rupee Deposits held in Domestic, Ordinary Non-Resident (NRO) and Non-Resident (External) (NRE) Accounts.pdf|pdf]] 11. G. Padmanabhan (ex-Executive Director, RBI). (2012, Aug 10). Managing Currency Risk in the New Normal. \[Speech\]. Iforex Leaders Summit, Mumbai on July 28, 2012. [Link](https://rbi.org.in/scripts/BS_ViewBulletin.aspx?Id=13477) | [[RBI_Speech_20120810_Managing Currency Risk in the New Normal_G. Padmanabhan.pdf|pdf]] 12. Harun R. Khan. (2012, October 18). Managing currency and interest rate risks – New challenges for banks & corporates \[Speech\]. 2nd FT-Yes Bank International Banking Summit, Mumbai. RBI. [Link](https://rbi.org.in/scripts/BS_SpeechesView.aspx?Id=744) 13. Harun R Khan. Apr 21, 2014. Regulating Capital Account: Some Thoughts. (Inaugural address delivered by Shri Harun R Khan, Deputy Governor, Reserve Bank of India at the 9th Annual Conference of FEDAI in Cape Town on April 12, 2014). [Link](https://rbi.org.in/scripts/BS_SpeechesView.aspx?Id=888) 14. RBI. (2014). *Box III.1-Monetary Policy Response to Exchange Market Pressures*. Annual Report-2014. [[RBI_Annual Report_2014.pdf#page=77&selection=28,0,28,53|pdf]] 15. Deepak Mohanty. Jul 24, 2014. *Unconventional Monetary Policy and the Indian Economy*. (Paper presented by Deepak Mohanty, Executive Director, Reserve Bank of India, in the SAARCFINANCE Governors’ Symposium at Colombo, Sri Lanka, on 24th July 2014). [Link](https://rbi.org.in/scripts/BS_SpeechesView.aspx?Id=905#A2) 16. Harun R Khan. (Oct 06, 2014). ==Indian Foreign Exchange Market: Recent Developments and the Road Ahead==. (Inaugural address delivered by Shri Harun R Khan, Deputy Governor, Reserve Bank of India at the 25th Annual Forex Assembly organized by the Forex Association of India (FAI) at Gurgaon on October 4, 2014). [Link](https://rbi.org.in/scripts/BS_SpeechesView.aspx?Id=919) 17. Ajay Shah. (2018, September). *Don’t just do something, sit there* [Article](https://www.nipfp.org.in/media/medialibrary/2018/09/03092018.pdf). Author is Professor at National Institute of Public Finance and Policy, New Delhi) 18. RBI. (2015). *FEM (Foreign Currency Accounts by a Person Resident in India) Regulations, 2015*. [Link](https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=10444) 19. Kanungo, B.P. (2019, Apr 25, 2019). *India’s growing significance in global arena. Is it Sustainable? Are we ready for it?* FEDAI Annual Conference at Beijing. [Link](https://rbi.org.in/scripts/BS_SpeechesView.aspx?Id=1074) 20. Joshi, D., & Chakraborty, L. (2022, September 30). *How much should India prop up the rupee?* [Interview]. National Institute of Public Finance & Policy. [[NIPFP_Interview_220930_How much should India prop up the rupee?.pdf|pdf]] 21. RBI. (2024, April 23). *India’s Foreign Exchange Reserves in High Volatility Episodes* - An Empirical Assessment \[Article\]. Monthly Bulletin. [Link](https://rbi.org.in/scripts/BS_ViewBulletin.aspx?Id=22526#F4) 22. RBI. (2025, January 15). *FEM (Deposit) Regulations, 2016*. Retrieved on December, 2025 from the [Link](https://rbi.org.in/Scripts/NotificationUser.aspx?Id=10325&Mode=0) 23. Yogeshwar B., Subhadeep H.,Nirupama K. (2005, May). *Financial Repression, Deposit Rate Deregulation, and Bank Market Power*. CAFRAL. [Link](https://www.cafral.org.in/sfControl/content/Speech/819202521009PMManuscript_26May%20(1).pdf) | [[RBI_CAFRAL_Research_250526_Financial Repression, Deposit Rate Deregulation, and Bank Market Power.pdf|pdf]] 24. RBI. [Master Direction](https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=12825#20) - Reserve Bank of India (Interest Rate on Deposits) Directions, 2025. 25. RBI. [FAQs](https://www.rbi.org.in/commonman/english/scripts/FAQs.aspx?Id=3737) on Master Direction - Reserve Bank of India (Interest Rate on Deposits) Directions, 2025. 26. RBI. Master Circular on Risk Management and Inter-Bank Dealings (Last Updated on March 31, 2015). [Link](https://www.rbi.org.in/CommonPerson/english/scripts/Notification.aspx?Id=1396) 27. ==RBI. Master Circular on Risk Management and Inter-Bank Dealings (Last Updated on September 22, 2025)*. [Link](https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=10485)== 28. RBI. *Notifications titled 'Investment by Foreign Portfolio Investors (FPI) in Debt'.* [^1]: G. Padmanabhan (ex-Executive Director, RBI). (2012, July 30). Managing Currency Risk in the New Normal.* \[Speech\]. Iforex Leaders Summit, Mumbai on July 28, 2012. RBI [Link](https://rbi.org.in/scripts/BS_ViewBulletin.aspx?Id=13477) | [pdf](RBI_Speech_20120810_Managing%20Currency%20Risk%20in%20the%20New%20Normal_G.%20Padmanabhan.pdf) [^1]: RBI. (2024, April 23). *India’s Foreign Exchange Reserves in High Volatility Episodes - An Empirical Assessment* \[Article\]. Monthly Bulletin. [Link](https://rbi.org.in/scripts/BS_ViewBulletin.aspx?Id=22526#F4) <div class="section-line" style="--line-color:#ff6600;"></div> <div class="section-line" style="--line-color:#ff6600;"></div> <div class="section-line" style="--line-color:#ff6600;"></div> [^2]: Harun R Khan. (Oct 06, 2014). ==Indian Foreign Exchange Market: Recent Developments and the Road Ahead==. (Inaugural address delivered by Shri Harun R Khan, Deputy Governor, Reserve Bank of India at the 25th Annual Forex Assembly organized by the Forex Association of India (FAI) at Gurgaon on October 4, 2014). [Link](https://rbi.org.in/scripts/BS_SpeechesView.aspx?Id=919) [^3]: Deepak Mohanty. Jul 24, 2014. Unconventional Monetary Policy and the Indian Economy. (Paper presented by Deepak Mohanty, Executive Director, Reserve Bank of India, in the SAARCFINANCE Governors’ Symposium at Colombo, Sri Lanka, on 24th July 2014). [Link](https://rbi.org.in/scripts/BS_SpeechesView.aspx?Id=905#A2) [^4]: Harun R Khan. Apr 21, 2014. Regulating Capital Account: Some Thoughts. (Inaugural address delivered by Shri Harun R Khan, Deputy Governor, Reserve Bank of India at the 9th Annual Conference of FEDAI in Cape Town on April 12, 2014). [Link](https://rbi.org.in/scripts/BS_SpeechesView.aspx?Id=888) [^5]: RBI. History of The Reserve Bank of India (1997-2008)-Volume V. [pdf](RBI_History%20of%20The%20Reserve%20Bank%20of%20India%20(1997-2008)_Volume%20V.pdf)