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Jul 16, 2013

RBI hikes Short Term Rates

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The Reserve Bank of India (RBI) has initiated its actions to stabilize the rupees, which has been at its lowest value against US dollar in the currency market.

The RBI has hiked the short term rates on Monday to check the devaluation of rupees.

On Monday, the rupee was at around 59.89, and lately the rupee was slipped to its lowest of around 60 rupees.

The aim of the apex bank is to boost the value of rupees against US dollar by chacking the liquidity in the economy.

The latest move by the RBI would discourage the banks to borrow fund and that would ultimately control the liquidity and credit market.

However, the stock markets in India tumbled on Tuesday following the hike the short-term rate. Both BSE Sensex and NSE Nifty were traded in red at morning trade on Tuesday.

The banks may increase the deposit rates to attract more customers and that would help the banks not to draw more from the apex bank for the purpose of credit.

The RBI would also sell the bonds in the open market operation worth 12,000 crore rupees to check liquidity.

On the other hand, following on its economic reforms, the UPA government may further liberalize the FDI norms in some selective sectors to boost the inflow of foreign fund into the country.

Experts believed that the inflow of foreign fund was must to check the devaluation of rupees and Indian economy – that has been under pressure due to the global slowdown.

The Governor of RBI D Subbarao called on the Finance Minister P Chidambaram and discussed about the strategy to strengthen Indian rupees.

The fall in the value of the rupees has been weighing high on the economy.


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