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April 19, 2001
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RBI says will meet forex market mismatches

The Reserve Bank of India on Thursday said it will continue to meet any temporary demand-supply mismatches which may arise in the foreign exchange market.

In a review of macroeconomic and monetary developments in 2000-01 (April-March) released along with the annual Credit and Monetary Policy for the current fiscal, the RBI reaffirmed it was committed to maintaining orderly conditions.

The rupee hit a lifetime low of 47.10 per dollar on Tuesday -- losing more than one percent in a week -- before recovering on verbal and suspected market intervention by the central bank.

The rupee came under severe pressure in the last financial year, weakening by 6.5 per cent against the dollar, due to firm world oil prices and slowing foreign capital flows.

As part of its rupee support measures, the central bank had tightened monetary policy in July and asked the country's largest commercial bank, State Bank of India, to launch an overseas deposit scheme aimed at expatriate Indians to overcome the shortfall from slowing foreign capital inflows.

The scheme raised $5.5 billion and helped India's foreign exchange reserves end 2000-01 at a record $42.256 billion, up from $38.036 billion in the previous year. Reserves have since risen to a new high of $42.689 billion on April 6.

Following a spell of stability in the rupee-dollar exchange rate since November, the RBI has moved towards easing its monetary stance.

It cut rates twice since mid-February, bringing the key bank rate down by 100 basis points to 7 per cent and the cash reserve ratio to eight percent from 8.5 per cent.

Monetary & Credit Policy 2001-2002 (First Half)

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