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.