RBI liberalises norms to boost forex inflows, shore up falling Rupee

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Jul 07, 2022

The Reserve Bank of India on Wednesday announced measures to diversify and expand the sources of forex funding with an aim to mitigate volatility and dampen global spillovers, including letting foreign investors invest in short-term corporate debt and allowing the purchase of more government securities under the fully accessible route.

The measures taken by the central bank come against the backdrop of the Rupee depreciating by 4.1% against the US dollar during the current financial year so far (up to July 5) amid the ongoing geopolitical tensions.

“The global outlook is clouded by recession risks. Consequently, high risk aversion has gripped financial markets, producing surges of volatility, sell-offs of risk assets and large spillovers, including flights to safety and safe haven demand for the US dollar. As a result, emerging market economies are facing retrenchment of portfolio flows and persistent downward pressures on their currencies," the RBI said while announcing the new measures to boost forex inflows.

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