RBI takes bold move to stabilize rupee: Seeks forex data from banks amid global volatility

New Delhi (The Uttam Hindu) : The Reserve Bank of India (RBI) has asked banks to provide detailed information on clients' transactions and positions related to forex deals amid growing volatility in the foreign exchange market. The central bank aims to assess whether there is widespread speculation against the Indian rupee.

The rupee has weakened significantly against the dollar over the past six months. During this period, the rupee fell from around 88 rupees per dollar to around 92 rupees. On Friday, the rupee closed at 91.74 per dollar. The RBI is taking these steps to control increasing market volatility and gain a clearer picture of the situation.

Experts believe the rupee's decline is due to several factors. Large corporate houses are purchasing dollars in advance to fund future imports. Furthermore, arbitrage deals have increased in the offshore non-deliverable forward (NDF) and forward markets. Banks are also increasing their trading positions within their prescribed limits, which is increasing market pressure.

Additionally, rising global geopolitical tensions, particularly those related to Iran, Israel and the United States, along with rising crude oil prices, a widening current account deficit, and declining foreign investment flows, are also considered key reasons for the rupee's weakness. The recent trade agreement between India and the United States provided some relief, but rising tensions in West Asia have renewed pressure.

The RBI has directed banks to provide complete details of customer transactions in the spot, forward, and offshore NDF markets. Specifically, for transactions exceeding $10 million, the customer's name and the purpose of the dollar purchase or sale will be required. Banks will also be required to provide information about their open positions and total purchases and sales in the inter-bank market.

Experts believe that such data will help the RBI better understand market activity, enabling the central bank to take timely action to control excessive rupee volatility.

Banking experts say that when the RBI asks for such data, it is also seen as a signal to limit speculation in the market. However, no formal directive has been issued in this regard.

Currently, the RBI is not pursuing a strategy to protect the rupee at any specific level, but has intervened in the forward market through measures such as buy-sell swaps when necessary. Experts believe that if global tensions persist and foreign investment remains weak, the rupee could remain under pressure in the future.