RBI to face new challenges in 2021 as Rupee, bonds lure overseas investors

Indian debt and rupee may lure overseas investors in 2021, just like the nation’s equities with one caveat: the central bank will face more challenges in curbing the local currency’s gains against the greenback.

Stocks have already attracted the biggest yearly inflows since 2012, adding to the woes for the Reserve Bank of India that has been buying up the deluge of dollars to curb the rupee’s gains. The resulting glut of cash in the financial system has caused short-term rates to crash, which, combined with high inflation, is dampening debt returns for foreign funds triggering a record outflow from bonds.

Sterilization