RBI raises intervention threshold to stabilise rupee but forex liquidity expected to shrink
· Business · Times of India
The Reserve Bank of India has increased the intervention threshold for dollar sales to banks from $5 million to $10 million per transaction, aiming to check sharp rupee depreciation. This move comes amid sustained foreign portfolio investor outflows and a widening current account deficit. Banks will need to hedge their dollar exposure more actively, raising hedging costs for importers and exporters. The central bank's direct market operations are likely to reduce overall forex market liquidity in the near term.
Why it matters
Indian importers and corporations will face higher hedging costs as banks absorb more dollar risk, potentially trickling down to increased petrol prices and import costs. Exporters may benefit from a more stable rupee but will need to navigate tighter dollar availability.
Read the original report — Times of India
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