Centre Asks RBI to Ramp Up Efforts to Check Rupee Fall, Says Report

New Delhi: With the Indian rupee caught in a downward spiral, like never before, the Centre has asked the Reserve Bank of India (RBI) to rev up efforts to support the rupee, Asia’s worst-performing currency of the past month, people familiar with the matter told Bloomberg.

Last week, government officials communicated to the Central Bank on the need to intervene more aggressively in the market to support the rupee, according to a report by Bloomberg. They also discussed the need for other measures including deposit schemes for non-resident Indians.

The rupee has sunk 11.6 percent so far this year versus the USD, set for its worst annual performance since 2011. It pared losses on Monday after a government official said the finance ministry and central bank are in touch on a daily basis, and the latter is intervening when needed.

The central government on Monday expressed concern about the decline of the rupee’s value for the first time and said that they are considering a special deposit scheme for non-resident Indians, among other measures, to curb further depreciation.

The rupee fell as much as 1.3 percent to a new record low of 72.66 against US dollar on Monday but regained a bit after the comments. The relief, however, may be temporary, the Bloomberg report noted.

A widened current account deficit and the rising crude oil prices — India’s biggest import — will continue to keep the government on edge and a strengthening dollar would further hamper its cause.

According to a data released by the RBI on Friday, India's current account deficit (CAD) widened to USD 15.8 billion in April-June in value terms this year as against USD 15 billion in the same quarter of 2017-18, mainly due to a higher trade deficit.

The report noted that the finance ministry and the Reserve Bank of India are in touch and that there is a constant intervention of the central bank in the currency market as and when the need arises.

In 2013, the central bank had helped the derailed rupee on its course by luring inflows of about USD 34 billion through discounted foreign-currency swaps.

Finance Minister Arun Jaitley had last week attributed the fall in rupee to global factors and said that there was no need for panic or knee-jerk reactions.

The opposition parties, led by Congress, organised a nationwide strike on Monday to protest against the falling rupee, which has also caused the fuel prices to spiral.

A report by International credit rating agency Moody's Investors Service mentioned that sustained weakening of the rupee was "credit negative" for Indian companies that rely on US dollar debt to fund their operations but generate revenue in rupees.