There is also a feeling that Reserve Bank might bring about a percentage point cut in export refinance rates and packing credit to boost exports, although some say that this may not be possible in the present circumstances.
The apex bank, according to some dealers, is expected to announce that banks might be able to lend funds out of their FCNR deposits in the local market. This will reduce the downward pressure on the rupee, and make the greenback easily available in the market.
Also expected is a relaxation in the availability of supplier credit and buyers credit. This will give nationalised banks the leverage to tap the export and import markets to the hilt.
This will, therefore, mean that much of the business of foreign banks will come to a standstill. Banks, however, do not expect Reserve Bank to do much in the matter as it will lead to several problems for the foreign banks and affect their profitability.
Some others say that since the Reserve Bank governor has said that the thrust will now be on containing inflation, there cannot be growth along with inflation control.
There is a chance of the rupee declining if Reserve Bank tightened controls and curbed liquidity in the market through the issue of more government paper.
Rupee-dollar stability in the coming months depends, however, on the inflow of foreign direct investments, the inflow from foreign institutional investors and the fund inflow from global depository receipt (GDR) issues.
GDR inflow has seen a fall as several companies have withdrawn their issues owing to the depressed market. There has also been a fall in FII and FDI investments, and this will bring about a decline in the rupee by the end of the year. The rupee will probably touch 36.50 by December-end, and there will be a rise in the forward premia levels with annualised rates crossing 11 per cent.
