MUMBAI (Reuters) - The rupee's fall to record lows has raised chances that the Reserve Bank of India will take more steps to support the currency, as a strategy built on tightening rupee money markets and raising short-term interest rates has had limited effect.
The worst performing Asian currency of the year so far hit a new life low of 61.80 rupees per dollar on Tuesday, breezing past a previous low of 61.21 hit on July 8. Central bank intervention helped the rupee recover, but by Wednesday it was sliding once again, to stand around 61.41 by 1:30 p.m.
Below are the possible steps that the RBI or the government could take to support the currency.
RBI ACTIONS
* FX intervention
* Tighten liquidity further by:
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- Raising banks' statutory liquidity ratio of 23 percent
- Further reducing how much banks can borrow from the
RBI under the daily repo auction
- Reducing the amount of funds RBI provides to banks under the export refinance scheme at the repo rate
- Bond sales via open market operations
- Raising banks' cash reserve ratio, now at a record low
4 percent
* Raise the policy repo rate, currently at 7.25 percent
* Provide a dollar-window for oil firms to pay for imports
* Buy oil bonds from companies by paying dollars
* Ask exporters to convert FX dollar holdings immediately
* Ask importers to delay or stagger dollar payments
* Curb speculation by cutting net open position limits
* Persuade banks and financial firms to raise funds abroad
GOVERNMENT MEASURES
* Raise foreign investment limits in debt
* Increase duties on non-essential imports, like electronics
* Attract money from Indian citizens abroad, or issue sovereign debt
* Announce additional fiscal, economic reforms
(Reporting by Swati Bhat and Subhadip Sircar; Editing by Simon Cameron-Moore)