Rupee Depreciation and RBI... Group 5's Assignment

This (post) would be applicable for only group 5, but we at group 5 are a nice bunch and believe that  everyone should go through if they want to. So please do so and do let us know if you've something to add to this, we'll be more than happy to do so.   

RBI shifts stance, plans to infuse liquidity... 

"RBI said on 20/08/13 that it would infuse 8000 Crores into country's cash strapped banking system by buying government bonds in the secondary market through the so called open market operation..... read further here  - Mint (dated 20/08/2013)

Loosing Credibility..

"The rupee begins to weaken in June. The Reserve Bank of India decides to tighten liquidity on 15 July to defend the rupee. New Delhi promptly assures markets that the measures are temporary, undermining the very basis of the policy. 

The rupee continues to weaken. The central bank then decides to further tighten policy on 23 July. It later brings in cash management bills on 8 August to further restrict liquidity in the domestic money market. And then - even as rupee continues its slide - RBI blinks. It says on 20 August that it will buy government bonds in a bid to bring down long-term interest rates 

The events of the past weeks have hurt the credibility of both the finance ministry and the central bank, especially the latter. Credibility is important in the conduct of policy in a market economy and it takes years to build. What has happened is unfortunate"
                                                                            - Mint (dated 21/08/2103) 



RBI's Special Dollar Window for Oil Firms...

The rupee gained 3.2 percent against the US Dollar on Thursday.  Under forex swap windows, the central bank will meet the entire daily dollar requirements of three public sector oil companies, Indian Oil, HPCL, and BPCL. This will enable these companies to bring us Dollars directly from the RBI in exchange for rupees for a fixed period. At the end of this period there will be a swap. The oil companies will sell dollars to the RBI and in turn get back the rupees. 

The expectation is that by keeping the oil companies, the big guzzlers out of the forex market, the current pressure on the rupee can be earned. 

In July India's imported crude oil worth around 12.7 Billion $, a little over a third of company's total imports of 38 Billion. Had this been implemented earlier like in June when the crude was 113 a barrel, India could've saved 7.7 Billion a month, a significant amount of money especially when the going is tough. 

This is not the first time this has happened, the same measures had been taken up in 2008 as well in the wake of Global Economy Crisis. 

More detailed report here
                                                   - The Economic Times (Dated 30/08/2013)