RBI Launches Rescue Package as Rupee Hits Record Low of 92 vs Dollar
The Indian rupee plunged to a historic low of 92 against the US dollar on Tuesday, triggering immediate intervention from the Reserve Bank of India (RBI). The central bank unveiled a multi-pronged rescue package designed to stabilise the falling currency and calm financial markets.
Key Takeaways
- The rupee touched a record low of 92 per US dollar.
- The RBI announced a $5 billion dollar-rupee swap auction.
- A special window was opened for foreign portfolio investors (FPIs) to access dollars.
- Open market operations (OMOs) will be conducted to buy government bonds and inject liquidity.
RBI’s Stabilisation Measures
To counter the rupee’s slide, the RBI announced a series of decisive steps:
- $5 Billion Swap Auction: A dollar-rupee swap facility to provide immediate foreign exchange liquidity.
- FPI Special Window: A dedicated channel for foreign portfolio investors to meet their dollar requirements, aiming to curb volatile outflows.
- Open Market Operations: The central bank will purchase government bonds. This move injects rupee liquidity into the banking system, supporting the currency and lowering yields.
Why is the Rupee Under Pressure?
The rupee has faced sustained selling pressure due to a confluence of global and domestic factors:
- Rising global crude oil prices increasing India’s import bill.
- A widening trade deficit.
- Capital outflows from emerging markets as global investors seek safer havens.
Analyst Outlook and Inflation Concerns
The RBI’s aggressive intervention signals its commitment to preventing a disorderly depreciation of the rupee. A sharply weaker currency can imported inflation and hurt economic growth.
While the measures are expected to offer near-term relief, analysts caution that the rupee may remain vulnerable in the medium term due to persistent global headwinds and external sector imbalances.
