The UK’s Brexit decision has galvanised the RBI into action, with Governor Raghuram Rajan answering media queries to assuage concerns on the markets. Rajan, in Switzerland to attend meetings related to the Bank for International Settlements, said that at this point Brexit is not particularly worrisome for India.

What measures is the RBI mulling to tackle the Brexit impact?

Since all the markets seem to be working, our main aim is to ensure that the markets themselves continue to provide whatever is needed. But if there is disruption in markets and liquidity is not available from certain quarters, we are fully ready to provide whatever liquidity, both dollar as well as rupee, is needed.

What will be the impact of Brexit on Indian banks’ operations overseas?

As far as Indian banks’ (operations) abroad go, presumably, the changes in currency values do affect them based on what kind of net exposure they have to different currencies. But broadly, because there have been movements up and movements down, unless you are overly exposed to one particular currency, I don’t think immediately there is a cause for worry though, of course, we will monitor their balance-sheet situation.

As far as FNCR(B) deposits go, I have said repeatedly that we are prepared in terms of the outflows and, of course, we have been taking delivery of currency steadily over time and I think when the time comes we will have additional dollars to repay whatever deposits flow out. But I think it is premature at this point to talk about some roll-over facility etc.

How long will the volatility last?

Volatility sort of goes through every market and just now we are seeing, for example, the DAX has slumped 10 per cent. So, these are all interconnected markets and naturally some concerns will spill over from one market to another.

I think at these times it is important to remember that India is less exposed to the external sector than many other countries.

That to some extent we are not a significant commodity exporter which is going to be hurt by a significant slowdown in global growth; that we are a commodity exporter in a number of areas where we might benefit, especially if the price of oil comes down; that there are a variety of reasons — the economy itself is on a stronger growth path than elsewhere. Therefore, after the initial worries about the consequences of Brexit — and I am not saying that we will in anyway be immune to those consequences — people will look around for places which are relatively less affected.

And being a continental economy with large domestic demand, which hopefully will be strengthened as a consequence of the relatively good prospects for the monsoon, I think we stand out as a reasonable prospect and after the initial concerns money should return here.

Do we have some sense of how much unhedged foreign exchange exposures corporate have?

First the rupee has been relatively well behaved compared to many other currencies, we haven’t seen the six-seven per cent change that has happened in, say, the Mexican peso, or to some extent the pound. But the corporates over time having experienced higher volatility, I think, have made two kinds of adjustments — the amount of external borrowing has come down in the least few quarters as well as we had seen after our early warnings about hedging… the amount of hedging had gone up.

But remember if the loans they have taken are five-six years in duration the issue of repayment in a stronger currency will not arise for some time, by which time hopefully the currencies re-establish into a new equilibrium.

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