Amid rising pressure on the Indian currency, the Reserve Bank of India is exploring new measures to stabilise the rupee and attract foreign capital into the system.
The RBI is considering allowing government banks to issue bonds in foreign currencies to bring in more dollars. This move aims to support the rupee, which has declined nearly 6% against the US dollar this year, making it the worst-performing currency in Asia so far. The proposed bonds are likely to have a tenure of 5 years, although the plan is still under discussion.
The rupee has been under pressure due to high oil prices and significant stock market outflows, which crossed $5 billion in April alone. These factors have also widened India’s trade deficit.
To reduce risks for banks and investors, the RBI is also evaluating the use of foreign-exchange swaps. This mechanism would help banks manage currency risk while offering better returns, without taking on additional financial exposure.
This strategy is not entirely new. The State Bank of India had adopted a similar approach in 2000, raising billions of dollars through foreign currency instruments.
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