RBI announces additional measures to check rupee slide
Mumbai: With the rupee still continuing to be weak, the Reserve Bank on Tuesday announced additional liquidity tightening measures to contain excessive speculation and volatility in the foreign exchange market.
RBI has reduced the liquidity adjustment facility (LAF) for each bank from 1 per cent of the total deposits to 0.5 per cent, thus limiting the access to borrowed funds from the central bank. The limit will come into force with immediate effect and continue till further notice, the RBI added.
In another measure to suck out liquidity from the system, RBI has asked banks to maintain higher average CRR (cash reserve ratio) of 99 per cent of the requirement on daily basis as against earlier 70 per cent. CRR is portion of deposits that banks are required to keep with RBI.
According senior bankers, the measures could suck out Rs 4,000-Rs 5,000 crore from the system.
The additional measures to check exchange rate volatility comes within 10 days of RBI taking stern steps to suck out liquidity from the system.
On July 15, the RBI had raised short term interest rates and announced to sell government securities worth Rs 12,000 crore. However, it raised only 2,532 crore from the open market sales (OMS) on July 18.
Initially, RBI injected dollars into the market to check slide of rupee, which touched a life time low of 61.22 level against the dollar. It fell four paise to end at a week's low of 59.76 against the dollar.