The Finance Ministry has raised its expectation on fund mobilisation by banks through the special window to $25 billion against $20 billion earlier.
The Ministry also feels that a further dip in the rupee, seen of late, has been due to ‘irrational sentiment’ in the market. On Tuesday, the rupee opened weaker and closed lower, at 63.71 to a dollar against Monday’s closing of 63.24. This was the fifth successive day of weakness in the rupee.
Rupee concerns
On the rupee’s current bout of weakness, Economic Affairs Secretary Arvind Mayaram said, “It (rupee) is not going down, just wait. I think it’s just crazy irrational sort of a sentiment that’s happening. I have an additional $20 billion to play with.”
With Tuesday’s closing, the rupee is at an eight-week low as strong US jobs data last Friday renewed concerns of an early tapering of the Federal Reserve’s quantitative easing programme.
Swap window
Economic Affairs Secretary Arvind “I hope it does (taper begins in December) because this whole thing (rupee fall) is because of that and when the taper begins you’ll see nothing will happen,” Mayaram said.
Mayaram hoped that rupee would stabilise soon on the back of various factors, including banks mobilising higher than expected foreign exchange . “Till November 30, our window is open, we might be able to touch even $25 billion,” he said.
In order to prevent a sharp deterioration in India’s external sector and attract foreign inflows, the Reserve Bank of India had, in September, announced a swap window allowing banks to swap foreign currency non-resident bank deposits and overseas foreign currency borrowings with RBI.
On Monday, RBI said it had received $17.5 billion so far under the special concessional window.
The RBI, on September 10, said category-I authorised dealer banks could also borrow funds from their head offices, overseas branches, and correspondents, and through overdrafts in nostro accounts up to 100 per cent of their unimpaired tier-I capital at the close of the previous quarter or $10 million, whichever is higher.
These windows were provided to curb the current account deficit (CAD). Earlier, the Ministry had projected the CAD, which is the difference between payment made and received in dollar, at $70 billion. Now, this estimate has been lowered to $60 billion or even less.