RBI prepared to deal with coronavirus impact on economy, markets
The Reserve Bank of India said on Thursday it was prepared to take all necessary measures to ward off the impact of coronavirus on the Indian economy, financial institutions and markets and added that it had adequate forex reserves to meet any emergency situation.
RBI also announced measures to provide US dollar liquidity to the Indian market that crashed to 74.34 mark against the US dollar on Thursday.
Indian markets along with their global counterparts have been battered by the impact of coronavirus that has led to several sanctions impacting economic activity and sparking fears of an uncertain future.
RBI said its forex reserves stood at $487.24 billion and it was well placed to meet any exigency. Another RBI release said that the forex reserves had increased during April-December 2019.
The central bank added that it was “closely and continuously” monitoring the rapidly evolving global situation and spillovers.
In one of the worst performances in recent years, the Sensex tanked by nearly 3,000 points on Thursday on the back of a global selloff after the World Health Organisation declared the coronavirus outbreak as a pandemic. US decision to suspend travel from Europe also contributed to the decline.
The rupee at 74.34 against the US dollar was close to its all-time low of 74.48 seen in October 2018.
RBI said the emerging market currencies were experiencing downside pressures partly due to “flight to safety” which had to a spike in volatility across all asset classes.
“Mismatches in US dollar liquidity have become accentuated across the world. On a review of current financial market conditions and taking into consideration the requirement of US Dollars in the market, it has been decided to undertake 6-month US Dollar sell/buy swaps to provide liquidity to the foreign exchange market,” RBI said on Thursday.
The swaps, RBI said, will be conducted through the auction route in multiple tranches and the auctions will be multiple price based, meaning, successful bids will be accepted at their respective quoted premiums.
The auction date has been set for March 16 between 9:30 am to 11 am and the swap amount will be USD 2 Billion.
The banking regulator had earlier asked state governments not to transfer their deposits out of private sector banks saying apprehensions about the safety of deposits in private lenders were highly misplaced.