The Reserve Bank of India yesterday imposed a 50 per cent interest rate surcharge on import finance and asked banks to levy a minimum 25 per cent rate on overdue export bills as part of its measures to control the steep fall in the rupee.
According to the RBI, the measures to take effect from May 26 will address the "leads and lags in the system which have led to undue volatility."
The rupee nosedived yesterday to an intra-day low of Rs 44.75, shedding almost 60 paise, or 1.5 per cent, over Wednesday's close.
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However, heavy RBI verbal intervention and an inkling of the impending measures pulled the rupee sharply up towards the close. The rupee ended the day at a sober 44.10, or five paise stronger than its previous close.
This is the first time after the Asian crisis of 1997-98 that the rupee has swung so wildly during a day's trading.
RBI governor Bimal Jalan yesterday issued a statement, maintaining that the measures were temporary and would be rolled back.
Jalan later addressed a press conference, promising a rollback "as soon as the environment of instability and uncertainty" was cleared. But he refused to specify a time-frame.
He also kept his options of stronger measures open in case the markets did not stabilise. "At present, no further monetary tightening or administrative measure are being contemplated," Jalan said in the statement.
The RBI governor, however, refused to comment on what was causing the instability_an excess demand or a sudden shortfall in dollar supplies. But he said the projected FII outflows should not cause concern. "The amounts of FII sales are very small, in the region of $100 million or so. There don't have much impact," he said.
The Mumbai call money market mirrored the movement in the forex market and rates increased to 8.80 per cent just as the rupee dived beyond 44.50. Securities prices too fell by 50 to 100 paise across the board, and yields jumped. But as news spread that RBI would soon announce measures for the forex markets, securities prices recovered at one shot and again fell steeply on the back of profit booking.