However, on a week-on-week basis, the reserves saw a moderate dip of just US$685 million for the week ended 06 September 2013. Last week as on 30 August 2013, the reserves had fallen by a massive US$ 2,230.6 million due to heavy dollar sales by the RBI to protect the rupee.
The RBI has been selling dollars relentlessly to check rupee's fall. The currency depreciated by a massive 21% between April and August, and hit an all-time low of 68.8 a dollar (on 28 August 2013) during this period. It has since then recovered and ended at 63.5 a dollar on 13 September 2013.
To curb the rupee volatility, RBI sold US$5976 million in the exchange rate market in July 2013. Moreover, besides selling in the spot exchange rate market, RBI had also taken several measures to lure dollar inflows and to prevent outflows from the domestic debt market.
It raised short-term interest rates by hiking the Marginal Standing Facility rate to 10.25% and capping banks' access to funds from the repo tender at 0.5% of their deposits. Newly appointed RBI governor Raghuram Rajan also announced further measures earlier this month, such as exporters are now permitted to re-book cancelled forward exchange contracts to the extent of 50% of the value of cancelled contracts as against 25% earlier. Further the facility is now also available to importers to the tune of 25%. He announced introduction of cash settled 10 year interest rate future contracts and will investigate the feasibility of introducing interest rate futures on overnight interest rates.
The RBI will swap incremental FCNR (B) deposit of tenure of 3 year and above, at a fixed rate of 3.5% per annum for the tenor of the deposit. Banks can now borrow 100% of their unimpaired Tier 1 capital as against 50% earlier. Such borrowing can also be swapped with the RBI at a concessional rate of 100 bps below the ongoing swap rate prevailing in the market.
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