Will RBI step in again to shore up rupee? Here is what RBI Dy Guv T. Rabi Sankar has to say

The Reserve Bank of India remains committed to the internationalisation of the rupee, but steps in with measures whenever there is excessive volatility, Deputy Governor T. Rabi Sankar said on Wednesday.

The rupee saw a sharp depreciation against the US dollar in March, amid the US and Israel war on Iran that led to a surge in crude oil prices and disrupted supplies of natural gas and other commodities. Huge sell-off by foreign institutional investors in the equity market added in to the pressure on the rupee. 

The rupee hit a record low of 95.20 intra-day on March 30 against the dollar. It has since recovered but has been fluctuating as uncertainty continues on the conflict in West Asia. On Wednesday, it declined for the third consecutive session, to provisionally close around 93.81 against the greenback. 

Amid the volatility, the central bank in March directed lenders to cap their net open rupee positions in the onshore deliverable market within $100 million at the end of each business day. 

Then on April 1, it barred authorised dealers from offering non-deliverable derivative contracts involving rupee to resident or non-resident users. The RBI partially relaxed this measure earlier this week. 

Deputy Governor Sankar stressed on Wednesday, the measures were temporary. Rupee going up or down was not the consideration, but it was the volatility, he added. 

"The commitment that we have (there are) two things—to having one single global market for the dollar rupee stance and secondly the commitment that we have to internationalisation of the rupee stance. They are there for the long term. All that was done was to deal with a temporary event that created a large volatility in the market. Once that is taken care of, we should be back on track in what we do," said Sankar. 

The market was very liquid and the price depended on demand and supply, he said. "We only come in when there is excessive and disruptive volatility." 

The deputy governor was speaking on the sidelines of an event marking 25 years of the Clearing Corporation of India. 

Separately, Sankar said the retail direct platform that was launched in 2021 had made investing in government securities very easy. 

He mentioned the participation was going up. According to CCIL's chairman M. Rajeshwar Rao, the number of accounts is now nearing 3.5 lakh and number of bids exceeding Rs 3.6 lakh, amounting to more than Rs 8,100 crore. 

The platform is undergoing iterations and CCIL is trying to improve it continuously, he stated. 

CCIL is the central counterparty for transactions on the platform, providing guaranteed settlement. Sankar felt that CCIL should have a presence globally and that it had already made a beginning in that direction. 

"It has started the foreign currency settlement in GIFT IFSC. It's a small beginning. But as IFSC business picks up, this will also become important. So, this is an area that I expect CCIL to make headway over the next 25 years," said Sankar.