The RBI on Wednesday said it is maintaining a close vigil on developments relating to the referendum in the UK on its continuing in the European Union, and will take all necessary steps, including liquidity support, to ensure orderly conditions in financial markets.

The central bank observed that in the run-up to the Brexit vote, uncertainty about the poll outcome has resulted in some amount of turbulence in global financial markets, including in India.

Answering a specific question on how prepared India is for Brexit after giving the Foundation Day lecture at the Tata Institute of Fundamental Research on Monday, RBI Governor Raghuram Rajan said: “I think Brexit can be quite damaging if it happens. Of course, we have already factored in some probability of it happening in the markets. If it doesn’t, we may see a market rebound.

“If UK exits, that will create some market volatility. UK may suffer a significant fall in growth as its central bank has been saying.”

Abheek Barua, Chief Economist, HDFC Bank, in a report, assessed that a vote by UK to remain part of the EU could mean some relief in the near-term and result in pound-dollar rallying towards the 1.50 level in the near-term and trading in a 1.45-1.55 range over the medium term and the dollar-rupee moving towards the 66.80 level.“However, the improvement in sentiment could remain short-lived as focus could shift back towards tighter US monetary policy and economic developments in China. We expect the USD (dollar) to rally over 2016,” he said.

According to a Bloomberg report, Federal Reserve Chair Janet Yellen included the UK vote as one of several potential international threats to the US economy. The Fed last week cited it as a factor when it kept interest rates on hold.

In the same report, Mario Draghi, President, European Central Bank, was quoted as saying that his Bank has plans in place in case this week’s UK referendum sparks turmoil that threatens the outlook for the euro region.

At a hearing of lawmakers in Brussels, Draghi said policymakers stand ready to act if price stability is threatened and highlighted the Brexit vote as a potential risk.

In particular, the ECB is ready for all contingencies following the UK’s EU referendum, he said in his opening remarks to the European Parliament.

Responding to questions, he said it’s very difficult to foresee the various ways that the vote could impact markets and euro-area economies, but assured that all preparations necessary for now have been made.

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