"The exchange rate witnessed a period of considerable volatility during May to August this year. The reasons are well known. Many currencies were affected," Chidambaram said. He further added The exchange rate must be resilient even while it is insulated against speculative attacks and excessive volatility.
The Reserve Bank of India (RBI) took a number of steps - some that were clearly emergency steps - and once volatility was contained, some of those steps were reversed, he said.
The rupee declined 27 per cent against the US dollar between April and August. It touched a record low of 68.8 against the dollar on August 28, but has recovered thereafter. It closed at 62.87 on 22 November 2013.
RBI has received till date USD 22.7 billion under the special concessional window for swapping Foreign Currency Non-Resident (Banks) Deposits and Overseas Foreign Currency Borrowings. The RBI had announced these schemes on September 4, 2013, as part of several measures to attract foreign inflows. The special window allows banks to swap fresh FCNR (B) dollar funds, mobilised for a minimum tenor of three years, at a fixed rate of 3.5 per cent per annum. On November 19, 2013, International Finance Corporation (IFC) issued the first tranche of US $ 161 million under its USD 1 billion Global Rupee Bond Program. The order book was of INR 20.6Bn (approx. 2 times oversubscription).
RBI also allowed banks to borrow up to 100 per cent of their tier-I capital from overseas, which can be swapped with the central bank at a concessional rate of 100 basis points below the ongoing swap rate prevailing in the market.
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