In the recent initiatives after a decade, the RBI has taken a major turn by selling 1 trillion bonds, making it a historic transaction in the last decade, It didn't happen even during the period of covid 19. It happened through open market operations of around 1 lakh crore according to Indian rupees. It was initiated in 3 phases on 17 September, 21 September and 28 September. The rupee reached up to 95 rupees in comparison to the dollar, making it critical. Due to Iran and the middle east crisis, as the currency is escalating higher, these initiatives have been taken by RBI.
By seeing such situations and the liquidity increasing across the banks, the RBI does not want to increase inflation and attract the wrong interest rates. So they initiated a policy for (FCNR) foreign currency non-residents, to get dollars coming in exchange for rupees. This initiative gave results above their expectations, making it around $127 billion. To manage that level of dollars, the RBI initiated bonds to manage a better economy.
This initiative has improved massive liquidity. To handle inflation as a precautionary measure, the RBI took this firm decision for long-term benefits. It benefits from stopping banks from giving bad loans with low interest rates and protect everyone from inflation growth. It would improve stronger foreign capital and balance Dollar and Rupee values. Having excessive cash with citizens could lead to price spike on food and goods. This initiative is a courageous move by the RBI to handle the economy.
