Emerging Markets Rates and Currencies Handbook

India (INR - Indian Rupee) Citi in India Citibank India is headquartered in Mumbai. It is the largest and most awarded foreign bank in India serving clients across Institutional, Corporate and Commercial Banking segments, it offers the entire spectrum of financial services such as corporate and investment banking, transaction banking, global markets and securities brokerage and clearing. Market Overview The Reserve Bank of India (RBI) maintains the INR in a managed floating regime. The INR is convertible on the current account but is relatively restricted on the capital account. The RBI monitors the value of the INR against a Real Effective Exchange Rate (REER). The INR exchange rate is determined in the interbank foreign exchange market. Additionally, a daily benchmark fixing is published by the Financial Benchmarks of India Limited (FBIL) for INR against USD, JPY, GBP and EUR. While there is no band or peg that the RBI monitors, the value of the INR is tracked on the basis of the REER. The RBI tracks the 6-country and 40-country REER indices* as indicators of external competitiveness. However, the INR rate has been known to deviate significantly from the longer-term REER average. Though there is a stated policy of allowing market moves based on underlying fundamentals, the RBI can intervene actively in the foreign exchange market in cases of excessive volatility. The Reserve Bank of India (RBI) conducts the monetary policy with the primary objective of maintaining price stability while keeping in mind the objective of growth. Price stability is a necessary precondition to sustainable growth. The Monetary Policy Committee (MPC) determines the policy interest rate required to achieve the inflation target. RBI uses several direct and indirect instruments for implementing monetary policy: repo rate, reverse repo rate, Cash Reserve Ratio, Statutory Liquidity Ratio, Liquidity Adjustment facility, Marginal Standing facility. RBI frequently conducts Open Market operations for purchase and sale of government securities, for managing 18