RBI tackles rupee volatility with new forex market safeguards

The RBI said these measures would strengthen market discipline and ensure appropriate risk management in the foreign exchange market, while maintaining an orderly and transparent market environment

Reported by 6 sources

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Quick Revision

Prelims-testable facts

01The Reserve Bank of India (RBI) has introduced measures to address pressure on the rupee, including tightening foreign exchange derivative rules.
02A 20% cash reserve requirement has been established for large forex derivatives transactions.
03The RBI has imposed a 20% cash reserve on forex derivatives to curb speculative bets against the rupee.
04The RBI will intervene to curb abnormal rupee volatility, not to fix a specific exchange-rate band.
05The RBI has introduced a dollar window for oil companies to meet their crude import needs, as part of measures to curb rupee volatility.
06The RBI's measures aim to strengthen market discipline and ensure appropriate risk management in the foreign exchange market.

Trap alerts

Most people think the RBI is trying to fix a specific exchange-rate band, but actually it is intervening to curb abnormal rupee volatility.
Most people think the RBI's measures are only aimed at supporting the rupee, but actually they also aim to curb speculative bets and maintain market discipline.

Mains Practice Question

Critically examine the measures introduced by the RBI to curb volatility in the foreign exchange market and their implications for the Indian economy.

250 words

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Prelims Practice MCQs

Single facteasy

The RBI is responsible for regulating which market?

A.Foreign Exchange Market
B.Stock Market
C.Commodity Market
D.Bond Market

The RBI is the apex regulatory body for the foreign exchange market in India, responsible for maintaining order and stability.

Single factmedium

The RBI has not specified the exact date for implementing which measures?

A.Measures to strengthen market discipline
B.Measures to ensure appropriate risk management
C.Measures to maintain an orderly and transparent market environment
D.Measures to curb volatility in the foreign exchange market

The RBI has introduced measures to curb volatility in the foreign exchange market, but has not specified an exact date for implementation.

Single facthard

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