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Rupee rises in early trade as tensions between RBI, govt ease

Increased selling of the US dollar by exporters and banks also improved sentiments for the Indian currency.  The Indian currency opened 18 paise higher at 71.47 level to the dollar compared to its previous close of 71.65.

twitter-logoBusinessToday.In | November 20, 2018 | Updated 10:40 IST
Rupee rises in early trade as tensions between RBI, govt ease

The rupee rose in early trade today after the outcome of the RBI board meet which signalled easing of stance by the apex bank over policy decisions in growing rift with the Narendra Modi government.

Increased selling of the US dollar by exporters and banks also improved sentiments for the Indian currency.  The Indian currency opened 18 paise higher at 71.47 level to the dollar compared to its previous close of 71.65.

The rupee has fallen 11.72% since the beginning of this year.

Intra day, the rupee gained 37 paise to 71.28 level against the dollar, its highest since September 4 this year.

Meanwhile, brent crude prices fell to $66.54 per barrel compared to its previous close of $66.79 per barrel.

During the trading session, they fell further to $66.39 per barrel intra day.

The 10-year benchmark yield also fell to 7.76% from Monday's compared to Monday's close of 7.79%.

On Monday, the Reserve Bank of India (RBI) concluded a critical day-long board meeting on a "cordial" note. The RBI board has come to the conclusion that the existing committee of the bank will oversee the issue of relaxing PCA norms for banks. Also, a new scheme could be announced for MSME loans up to Rs 25 crore, reported CNBC TV 18. The next meeting of the RBI will be held on December 14 to discuss the issues of liquidity in the system.

The three most contentious issues included a shortage of liquidity in the system, RBI's strict Prompt Circular Action (PCA) norms against 11 banks, and how much reserves should remain with the RBI.

With regard to banks under Prompt Corrective Action (PCA), it was decided that the matter will be examined by the Board for Financial Supervision (BFS) of the RBI.

Of the 21 state-owned banks, 11 are under the PCA framework, which imposes lending and other restrictions on weak lenders.

These are Allahabad Bank, United Bank of India, Corporation Bank, IDBI Bank, UCO Bank, Bank of India, Central Bank of India, Indian Overseas Bank, Oriental Bank of Commerce, Dena Bank and Bank of Maharashtra.

The central board headed by RBI Governor Urjit Patel, which met amid the on-going tussle between the Finance Ministry and the central bank over various issues, discussed the Basel regulatory capital framework, a restructuring scheme for stressed MSMEs, bank health under Prompt Corrective Action (PCA) framework and the Economic Capital Framework (ECF).

Patel and his deputies came face to face with government nominee directors -- Economic Affairs Secretary Subhash Chandra Garg and Financial Services Secretary Rajiv Kumar -- and independent members like S Gurumurthy to arrive at a middle ground on some of the contentious issues.

The Board also advised that the RBI should consider a scheme for restructuring of stressed standard assets of MSME borrowers with aggregate credit facilities of up to Rs 25 crore, subject to such conditions as are necessary for ensuring financial stability.

Most of the RBI's 10 independent directors, including Tata Sons Chairman N Chandrasekaran, attended the meeting that had drawn intense media and market attention.

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