The Reserve Bank of India is taking various measures to control further depreciation of rupee. The bank sold $20.6 billion in October as per the recently released bulletin of the bank. Rupee witnessed a record fall in October and is currently varying at 49-50.50 to a US dollar. This huge decline in rupee value forced the apex bank to intervene. India’s foreign reserve also witnessed a record fall following the heavy sale of the dollar. The director and Principal economist at the rating agency, Crisil, Dr D. K. Joshi said that the sale of the dollars was necessary under the given circumstances. Variations in crude oil prices and flight of capital forced the apex bank to intervene.
RBI purchased $5.68 billion and sold $34 billion in the current fiscal leading to the liquidity crunch in the monetary system. However, the situation was eased following the various measures announced by the apex bank.
The bank had not sold dollars in the market in 2006-07. It added about $100 billion in India’s foreign reserve kitty in the financial years 2006 to 2008.
Country’s foreign reserve includes Euro, US dollar, Yen, UK Pound, Hong Kong dollar and Renminbi Yuan besides SDR and gold.
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