The Reserve Bank of India announced measures late on Monday to curb the rupee’s decline by tightening liquidity and making it costlier for banks to access funds from the central bank.
The RBI raised the Marginal Standing Facility (MSF) rate and Bank Rate each by 200 basis points to 10.25 percent, capped the amount up to which banks can borrow or lend under its daily liquidity window and announced a sale of government securities through an open market operation.
The RBI said total funds available under its repo window will be capped at 1 percent of banks’ deposits – roughly 750 billion rupees ($12.5 billion) – from Wednesday. It announced a 120 billion rupee sale of government bonds for Thursday.
The central bank does not set a target for the rupee, which hit a record low of 61.21 to the dollar last week, but it does take measures to manage volatility.