RBI forex intervention to touch $93 bn by Mar.

Mumbai, Jan. 18: The Reserve Bank of India (RBI) is likely to spend at least $20 billion more to support the rupee and increase the forex kitty through the reminder of the financial year, taking its overall forex intervention to $93 billion, according to a report.

The report by the Wall Street brokerage Bank of America Securities also expects the central bank to raise banks' HTM (held-tomaturity) limits of excess government securities by 2 per cent of their books to fund the fiscal deficit if high forex intervention limits its open market operations (OMOs).

So far this fiscal, the RBI’s forex intervention has touched $73.7 billion, according to the assessment by brokerage’s India economists Indranil Sen Gupta and Aastha Gudwani. They also feel the RBI to intervene with $45 billion in 2021-22 if the current account deficit (CAD) stays 0.5 per cent of the GDP.

After eight years, the RBI under the current governor Shaktikanta Das has been building up the forex reserves, which as of

January 15 stood at $586.1 billion, a lifetime high.

While delivering the Nani Palkhivala lecture last Saturday, Das repeated his resolve to not let the

2008 or 2013 run on the rupee to be repeated again.

"Our BoP (balance of payment) forecasts place RBI forex intervention at

$93 billion ($73.7 billion so far) in 2020-21 and $45 billion in 2021-22 if the the CAD remains at 0.5 per cent of GDP, which is dependent on the crude oil averaging at $50 a barrel," the report said.

It said since high forex intervention is limiting OMOs, the RBI is expected to raise banks' HTM limits by 2 per cent of their books to fund the fiscal deficit.

The report further said it is sure the RBI will continue to buy forex when the dollar is weakening and let the rupee depreciate when it strengthens.

On Saturday, Das had said, "To mitigate global spillovers, EMs (emerging markets) like India have no recourse but to build their own forex reserve buffers, even though at the cost of being included in the currency manipulators list."