Reserve Bank of India governor Raghuram Rajan put in place rules to curb speculation in the currency markets, made it cheaper for banks to attract FCNR deposits and allowed OMCs to borrow from a special swap window.
The result has been a strong rebound in the rupee. There was succour for the money market too as the MSF rate was gradually lowered and the term repos — for seven and 14 days — were introduced. Putting in place a mechanism that will help banks detect NPAs early on, Raghuram Rajan has offered them sops for a quick decision on handling troubled assets.
RBI GOVERNOR HITS THE GROUND RUNNING
Aug 28:While OSD in RBI, Rajan opened swap window for oil PSUs to buy dollars; took their demand out of the market while keeping forex reserves constant. Later, said oil PSUs could settle swaps in rupees. Allowed banks to transfer bonds from AFS to HTM to avoid large losses from sharply higher yields
Sept 4: Made it attractive for banks to borrow FCNR as well as Tier-I capital by absorbing part of hedging cost
Sept 4: CPI-linked inflation bonds for retail investor