The Reserve Bank of India is not planning to change the methodology used to arrive at the reference rate of the rupee against the dollar and euro, its deputy governor H R Khan said on Wednesday. The country’s central bank, though, will seek feedback on the matter, if needed.
RBI had, in July this year, revised the methodology. According to that, rates taken from a two-hour window were averaged. The window was shrunk to half an hour after a few days. “We had done that. Time was originally a two-hour window, now it is half-an-hour window,” Khan said, while addressing an event here. RBI would not change the methodology immediately, but would look look for feedback if the situation merited it, he added.
Currently, RBI takes the average of rates from select banks at a randomly chosen five-minute window between 11.45 am and 12.15 pm everyday — except for Saturdays. The contributing banks are selected on the basis of their standing, market-share in the domestic foreign exchange market and representative character.
The RBI-published reference rate is used by foreign exchange market participants while quoting for deals. “The rupee is very volatile now,” said a forex dealer with a domestic brokerage. “A small window may not reflect the market range properly.”
Rupee has depreciated by almost 18 per cent from 44 to 52 levels in the short span of three months on the back of heightened global risk aversion.
The deputy governor also pointed out that the volatile capital flows can cause concern and that the RBI preferred stable foreign direct investment. “We have capital scarcity,” he said. “Our current account deficit continues. So we look at stable FDI inflows.”
Most sectors are open to FDI, but the central bank will not like too much exposure in debt, he added.
