RBI measures fail to cheer up markets, rupee near 58 level

The much-awaited RBI measures to stem rupee's slide did not match market expectations amid rupee plunging close to 58 level


Mumbai/New Delhi: To arrest the rupee slide, the Reserve Bank of India (RBI) on Monday increased foreign institutional investors (FIIs) limit in government bonds by $5 billion to $20 billion, while allowing up to $10 billion from overseas borrowings by India Inc for refinancing rupee loan, reports PTI.

Long term investors like Sovereign Wealth Funds (SWFs), multilateral agencies, endowment funds, insurance funds, pension funds and foreign central banks would be allowed to invest in government debts up to $20 billion, RBI said in a notification.

The rupee, which breached the 57-level on 22nd June, opened in the positive zone against the dollar but soon after the RBI measures were announced it sharply fell to 57.92 levels. Similarly, the BSE benchmark Sensex, which had climbed to a seven- week high of 17,132 during the day, lost momentum and touched a low of 16,853 after RBI annoucement.

The decisions have been taken "in consultation with the government," RBI said, adding that they will widen foreign investor base for government securities (G-Secs).

"It has been decided to allow Indian companies in manufacturing and infrastructure sector and having foreign exchange earnings to avail of external commercial borrowing (ECB) for repayment of outstanding rupee loans towards capital expenditure and/or fresh rupee capital expenditure under approval route. The overall ceiling for such ECBs would be $10 billion," the central bank said.

Industry body, FICCI, however said the steps announced (by RBI) are minimal in nature. "The steps announced so far are probably minimal at this time but could lead to some inward capital flows if this is supported by stronger fundamentals. We were however hoping for a broad based set of strong actions as well as policy reforms that could have a positive bearing on the overall environment. Every delay in announcing such measures is only reducing their ultimate effectiveness and extending the weak phase of our economy," said RV Kanoria, president, FICCI.

The RBI further said the existing limit for investment by foreign institutional investors in G-Secs has been enhanced by $5 billion.

"This would take the overall limit for FII investment in G-Secs from $15 billion to $20 billion. The sub-limit of $10 billion (existing $5 billion with residual maturity of 5 years and additional limit of $5 billion) would have the residual maturity of three years," RBI said.

Also, the terms and conditions for the scheme for FII investment in infrastructure debt and the scheme for non- resident investment in Infrastructure Development Funds (IDFs) have been further rationalised in terms of lock-in period and residual maturity.

Further, the conditions for investment by individual foreign investors have been relaxed in Mutual Funds.

RBI said that qualified foreign investors (QFIs) can now invest in those mutual fund (MF) schemes that hold at least 25% of their assets in infrastructure sector under the current $3 billion sub-limit for investment in mutual funds related to infrastructure.

The liberalisation measures for capital account transactions, which have come into operations with immediate effect, besides increasing foreign fund inflows into the country are also likely to check slide of rupee against the US dollar.




5 years ago


Uttar Pradesh government stops wheat procurementUttar Pradesh government stops wheat procurement

Wheat procurement in Uttar Pradesh will come to an end on 30th June due to limited storage capacity and the buying agencies exceeding their target for 2012


Lucknow: Taking note of the limited storage capacity and the buying agencies exceeding their target this year, the Uttar Pradesh government has decided to end wheat procurement by the end of this month, reports PTI.

Seven agencies have been stopped from wheat procurement in phases, Joint food commissioner Anil Kumar Damele said.

They are UP Agro, UP Upbhokta Sangh, State Essential Commodities Corporation, State Employees Welfare Corporation, Food Corporation of India (FCI), National Agriculture Cooperative Marketing Federation of India (NAFED) and National Cooperative Consumers Federation of India Ltd (NCCF).

Damele said Pradeshik Co-operative Federation (PCF) has been directed to stop wheat purchase from tomorrow evening.

Wheat procurement in the entire state will come to an end on 30th June with food and Civil Supplies department closing its purchase centres, he said.

The state government has also issued directives to ensure safety of wheat kept in open and asked officials to lift wheat kept at open spaces for public distribution system (PDS).


Sushil Kumar Shinde deposes before Adarsh panel

Former Chief Ministers Vilasrao Deshmukh and Ashok Chavan are scheduled to appear as witness on 27th June and 30th June, respectively, before the Commission


Mumbai: Union Power Minister and Maharashtra's former Chief Minister Sushil Kumar Shinde on Monday deposed before the Adarsh Commission in connection with the Adarsh housing society scam, reports PTI.

Shinde was the chief minister of Maharashtra from 2001 to 2003 when he cleared many files including allotment of land to Adarsh.

The two-member Adarsh Commission probing the Adarsh society scam had issued notice to Shinde on 23rd June to appear before it today as a witness in the case.

Former Chief Ministers Vilasrao Deshmukh and Ashok Chavan are scheduled to appear as witness on 27th June and 30th June, respectively, before the Commission.

Earlier, Aditya Patil, who told the Commission that he was nephew of cabinet minister Jayant Patil deposed before the commission on Saturday.

He told the commission that former MLC and an accused Kanhaiyalal Gidwani had helped him get a flat in the society.

The scam pertains to alleged irregularities in construction and allotment of apartments in the 32-storeyed high rise, originally meant for families of Kargil war heroes, in the upmarket Colaba area in south Mumbai.

The Bombay High Court is monitoring the probe being conducted by CBI, Enforcement Directorate and Income Tax.


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