RBI to take necessary steps to arrest rupee fall: Subbarao

DEHRADUN: Amid steep decline in the value of rupee, the Reserve Bank today said that it is monitoring the situation and will do whatever is necessary to check the currency's fall.

"RBI will do whatever is necessary. Some structural changes are necessary for improvement in current account. Meanwhile, the RBI is monitoring the situation and we will do whatever is necessary, consistent with our policy," RBI Governor D Subbarao said while addressing a press conference after a meeting of the central bank board here.

Pointing out that the rupee has been depreciating over the last three to four months, he said, "RBI is continuously monitoring the situation. We have taken action through current account flows, encouraged inflows and also (steps) to curb speculation."

After losing ground three days in a row, the rupee today touched its lifetime low of 56.38 to a dollar but later recovered around the same time when Subbarao was addressing media here.

Since March 1, rupee has lost over 13 per cent and 11 per cent since the presentation of Budget on March 16 in the face of withdrawl of funds by foreign investors from stock markets.

The Budget contained proposals like retrospective taxation and general anti-avoidance rules (GAAR).

The movement of rupee, Subbarao said "is a function of external situation as well as development in current account and capital account and balance of payments".

On the issue of RBI selling dollars directly to oil marketing companies, Subbarao said, "That's been an issue on the table. I am not ruling it out. I am also not saying that we are going to do it right know. It's an open issue. We have done it in past. At the moment, we have not done it so far."

Several experts, including C Rangarajan, chairman of the Prime Minister's Economic Advisory Council (PMEAC), have suggested that RBI should consider selling foreign currency to oil companies as they withdraw huge amounts to buy crude in the international market.

Replying questions on the price situation, Subbarao said the deterioration in inflation has been mainly on account of rise in prices of food items.

"We noted that inflation has been a surprise upside for month of April. We also noted that increase has been on account of food inflation," he said, adding the central bank will take into account recent developments while announcing its mid-quarterly policy review on June 18.

Inflation, represented by the wholesale price index, rose to 7.23 per cent in April from 6.89 per cent in the previous month, while retail price inflation (CPI) entered double digits of 10.36 per cent in April from 9.38 per cent in March.