The rupee continued to plumb new depths touching a record low of 64.13 on Tuesday, broadly reflecting the government’s and the Reserve Bank of India’s (RBI’s) inability to control a free-falling domestic currency despite a string of measures.
In a latest move to attract more dollars, the central bank on Tuesday eased norms aimed at offering more attractive returns on NRI deposits in Indian banks, relaxed rules making more funds for banks to lend and took steps to inject additional funds of Rs. 8,000 crore into the banking system.
Finance minister P Chidambaram held a meeting with top macroecomic managers including chairman of Prime Minister’s economic advisory council C Rangarajan, Planning Commission deputy chairperson Montek Singh Ahluwalia and economic affairs secretary Arvind Mayaram, among others.
“The fall in value of rupee in the recent period can be explained by the supply-demand imbalance in the domestic foreign exchange market on account of elevated levels of current account deficit (CAD) and volatility in capital flows, particularly foreign institutional investment (FII) inflows,” Chidambaram told the Lok Sabha in a written reply on Tuesday.
The currency recovered during the day, but still closed at a record low of 63.13 to the dollar. In equity markets, in a volatile session, the BSE benchmark Sensex index slipped below 18,000-level in early trade falling nearly 337 points, but recovered closed 61 points down, extending the downtrend to the third day, as the rupee remained weak.
In three days, the index has lost over 1,100 points.