MUMBAI: With the rupee remaining under pressure amidst a sell-off in emerging market risk assets, market participants are expecting a host of rate and non-rate measures from the Reserve Bank (RBI) and the government in the coming days.
According to Singapore-based DBS Bank, tapping foreign exchange reserves will be the first line of defence, which is already underway.
Rate hikes will be the next recourse, which is a prudent policy move but has not been most effective in arresting a weakening rupee. Thereafter, it said liquidity tightening could be accompanied by specific measures like higher returns on NRI deposits or fresh bond issuances.
“The markets are beginning to price in a possible scheme to raise NRI funds. The proposed size could also be in the range of $30-40 billion taking the past scale as a gauge,” DBS Bank said.
Analysts at BoAML too believe that issuing NRI bonds are more effective. It expects the ministry of finance and RBI to raise NRI bonds worth $30-$35 billion if rupee persists above 70 level mark into the December quarter.
