INDIA: RBI TIGHTENS LIQUIDITY TO PROTECT THE RUPEE

NEW DELHI - The Reserve Bank of India (RBI) has taken the bold step of tightening interbank liquidity and raising the cost of shorting the Rupee (INR) in an effort to stem potentially destabilising INR weakness. The RBI has significantly limited banks’ access to funds at the policy repo rate of 7.25%. At the same time, it has raised the cost to banks of borrowing cash in excess of this limit by 200 basis points to 10.25%.