RBI met with bank managers to get an idea of market sentiments: Reports

13 Jul 2022 , 09:04 AM

On Tuesday, as the rupee hit a new low and investors became hesitant to purchase additional government bonds after suffering losses from rising yields, the Reserve Bank of India met with senior executives of major banks and treasury managers to gauge market sentiment.

This coincides with the rupee’s decline, which has prompted a flurry of regulatory measures aimed at restoring foreign inflows and reducing dollar payments tied to imports.

According to the reports, the central bank also requested feedback on its decision to liberalize foreign exchange inflows on July 6.
About 18 institutions, including public, private, and foreign lenders, were represented at the conference, which was reportedly presided over by an executive director of the RBI.

According to the reports, banks informed the RBI that efforts to increase foreign exchange flows, such as external commercial borrowings or deposits from non-resident Indians, will take time to trickle down.

On Tuesday, the rupee dropped to a new record low against the dollar of 79.66 before ending the day at 79.60.

The dollar index, which compares the value of the dollar to a basket of foreign currencies, increased 12.3% this year as a result of the supply shortages caused by the Russia-Ukraine conflict.

The euro currency reached parity with the US dollar in Europe, which is experiencing a recession, for the first time in more than 20 years. Tuesday saw a new low for the local currency in Europe as investors were fearful for the state of the world economy.

The meeting’s bank treasury heads reportedly stated that India’s macro and fundamental parameters were resilient, the rupee will find its own smart value, and the macroeconomic environment would improve for India in a quarter or two.

In comparison to the Chinese Renminbi’s 5.44% decline in value against the dollar, the rupee has lost 6.6% this year, ranking as the ninth worst-performing Asian currency.

The meeting’s attendees were questioned by the central bank over the direction of the benchmark bond yield. The benchmark bond is expected to yield between 7.75% and 8% this year, according to banks on average.

The matrix, which establishes a pricing scale for bond sales, is a crucial benchmark, particularly in light of the fact that the central bank oversees the finance ministry’s record-breaking fundraising of over Rs14.31 lakh crore (gross).

So far this year, outside funds have sold a total of $1.87 billion in local debt instruments.

The benchmark repo rate was first increased by the banking regulator on May 4 by 40 basis points (bps), and then by another 50 bps the following month.