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RBI steps in with measures to boost forex inflows and rupeeThe Reserve Bank of India announced a series of new measures to increase the foreign exchange inflows to mitigate the rupee’s dramatic decline as the safe-haven dollar has reigned supreme against almost every currency.Late on Wednesday, the RBI stepped in with measures to increase international currency inflows, including letting foreign investors invest in short-term corporate debt and allowing the purchase of more government securities under the fully accessible route.A further breakdown of the measures announced by the RBI includes:Doubling the limit set for domestic companies to borrow to $1.5 billion.Temporarily removing the interest rate cap for banks to attract deposits from NRIs (non-resident Indians).Easing the stringent norms set for foreign investors to maintain financial stability.Those measures are primarily aimed at stemming the rupee’s slide, as more foreign investments in international currency into the country would mean more demand for the rupee in exchange for buying domestic currency denominated Indian assets.While the central bank has intervened in the foreign exchange markets, selling dollars in the spot and futures market, the rupee has repeatedly hit all-time lows since it breached the 77 per dollar mark for the first time ever in March, days after Russia invaded Ukraine.While sharp, the rupee’s decline has been limited by the RBI’s efforts and plans to intervene only to stop “jerky movements.”But with the currency only a hop, skip and jump away from another key-psychological level of 80 per dollar, the central bank has been forced to widen its efforts to stem the rot in the currency.”(The) rupee has depreciated by 4.1 per cent against the US dollar during the current financial year so far (up to July 5), which is modest relative to other EMEs (emerging market economies) and even major advanced economies (AEs),’ the RBI statement read.’To further diversify and expand the sources of forex funding to mitigate volatility and dampen global spillovers, it has been decided to undertake measures listed in the document,’ added the statement, referring to the measures mentioned above.

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