The Hindu Business Line : RIB outflows will not impact markets: RBI

WITH the Resurgent India Bonds (RIB) redemptions just a fortnight away, the Reserve Bank of India has reiterated that ` no cognisable impact' is anticipated in the financial markets on account of the dollar outflow.

The RBI will meet most of the foreign exchange required for redemption directly, out of forward purchases already in place, and the balance requirements of SBI will be provided by RBI from its own resources, said a press release.

The arrangements put in place by RBI-SBI are expected to ensure smooth conduct of operations in the money and foreign exchange markets though large value/volume transactions may be condensed in a few days, the release said.

The RBI has said that it will infuse rupee liquidity into the market on account of purchase of forward foreign currency assets and this will, to a great extent, neutralise the rupee outgo from SBI to RBI for purchasing the foreign exchange required for redemption. The balance lying in the Maintenance of Value account built up during the last five years would be used to meet the exchange loss.

SBI would, therefore, be paying to RBI only the balance amount, which would depend on the market exchange rate prevailing on the date of redemption.

Going by the present liquidity conditions in the market, it is felt that the system should be in a position to take care of the redemption requirements. Further, the eligible market participants can take recourse to the LAF of RBI (which consists of repo/reverse repo and backstop facilities) for short-term requirements of rupee funds, according to RBI.

The central bank has said that it will be closely monitoring the inflow into the deposit schemes viz. FCNR(B) and Non-Resident (External) Account and appropriate operational strategies would be worked out to ensure smooth absorption of the flows.

Arrangements have already been made whereby RBI will promptly issue instructions to its correspondents abroad to deliver foreign exchange to SBI/beneficiaries in three currencies viz. US dollar, GBP and Euro to cover the principal and interest payments so that the bondholders receive their money on the due date.

SBI has made arrangements to receive back the rupee deposits placed with the banks, which had associated with SBI in mobilisation of RIBs, and also for rupee resources to acquire foreign exchange from RBI.

Article E-Mail :: Comment :: Syndication

Stories in this Section
SC ruling on paddy puts Centre, UP Govt in a bind

Rains fill up 58% level in reservoirs

Bankers give Reliance credit -- plenty of it!

Sensex sheds 101 points on overbought futures position

`NRI-owned overseas firms on par with foreign investors'

RIB outflows will not impact markets: RBI