RBI announced slew of measures to curb Rupee Volatility
Reserve Bank of India (RBI) on 15 July 2013 announced measures to deal with rupee volatility.
The Reserve Bank of India (RBI) on 15 July 2013 announced measures to deal with rupee volatility which includes lifting of two interest rates by 200 basis points each and a planned sale of 120 billion rupees (2 billion dollars) of government bonds on July 2013.
RBI has also adjusted the Marginal Standing Facility (MSF) and the Bank Rate to 10.25% each which were 8.25% previously. The repo rate, was kept unchanged at 7.25%. It is worth mentioning here that the rupee in second week of July 2013 hit a record low of 61.21 to the dollars.
The RBI also hiked the lending rates for banks and had absorbed 12000 crore Rupees in order to make the currency more high-priced.
What is Marginal Standing Facility (MSF)?
The Marginal Standing Facility (MSF) which was introduced during the 2011-12 period, is the rate at which banks can borrow from the central bank at an increased rate against government securities during times of tight cash. The bank rate is a linked to the MSF.
RBI in second week of July 2013 BI had asked over oil firms to source all of their 8-8.5 billion of dollar needs every month for import of oil, from a single public sector bank. It also banned banks from trading in currency futures and exchange-traded currency options market on their own.