RBI buying dollars in spot market & selling it in forward market to stabilise rupee

Mumbai – The Reserve Bank of India, under Governor Raghuram Rajan, seems to have changed its strategy when it comes to defending the fragile rupee and managing liquidity.

The central bank, which earlier used to sell dollars in the local markets, is now increasingly buying the US currency in the spot market and selling it in the forward market. The revised strategy seems to be having a bearing on the non-deliverable forwards, or NDF, market.

The move, experts say, is aimed at not only stabilising the local currency but also managing liquidity, as there was a surge in inflows after banks were allowed to swap Foreign Currency (Non-Resident) Accounts (Banks), or FCNR (B), proceeds for a premium.