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Business News/ Opinion / Online-views/  Reserve Bank says volatility declined
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Reserve Bank says volatility declined

Reserve Bank says volatility declined

Money talk: RBI deputy governor Rakesh Mohan.Premium

Money talk: RBI deputy governor Rakesh Mohan.

Mumbai: Volatility in India’s currency and money markets has declined, Reserve Bank of India (RBI) deputy governor Rakesh Mohan said.

The rupee rose as much as 1.6% on 16 April, the most in almost a decade, and has climbed more than 8% this year, making it the best performer among 15 active Asian currencies.

Capital flows from abroad and the central bank’s measures to remove excess cash from the banking system pushed the rupee to as high as 40.545 against the dollar on 7 May, the highest in nine years.

Money talk: RBI deputy governor Rakesh Mohan.

The overnight lending rate between banks in the past two months has swung between 2% and 73.5%, the most in at least nine years, resulting in sharp movements in the currency market as well as some banks sold dollars to raise cash to meet their cash requirements.The central bank needs to take efforts to make Indian bonds more frequently traded, Mohan said. Debt with longer maturity aren’t liquid, he said.

The “highest priority" of the central bank is to contain inflation, he said. Wholesale price inflation slowed to 5.66% in the last week of April, the lowest rate in almost five months, the government had said on 11 May.

RBI may change the so-called statutory liquidity ratio of lenders from 25% should economic and monetary conditions become stable, Mohan said. Banking laws in the country require lenders to hold at least a quarter of their incremental deposits in low-risk government securities.

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Published: 16 May 2007, 11:58 PM IST
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