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RBI mulls capital controls as rupee wilts under FII pressure news
05 December 2011

The Reserve Bank of India (RBI) has indicated its willingness to act as the rupee continued its downward drift, raising the prospect of the worst financial crisis in decades.

The domestic unit was 51.41/42 against the US dollar at close of trading on the interbank foreign exchange market today. The rupee, which ended Friday at 51.20/21, moved in a band of 51.23 to 51.4650 during the day.

The central bank, which allowed foreign investors to put more money in Indian stock markets and allowed corporates to borrow more overseas, is now talking of capital controls to stem the rupee's continuing decline.

The recent sharp depreciation isn't a sign of ''helplessness in dealing with the kind of global turbulence we are seeing,'' Subir Gokarn, deputy governor of the RBI, said at a week-end conference in Mumbai.

''We do have the instruments to do this in the form of strategic capital controls, which can be used to enhance the supply of foreign exchange,'' he said.

He said there are already restrictions on debt inflows applying to quantity, tenor and pricing.

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RBI mulls capital controls as rupee wilts under FII pressure