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Rupee at right level says RBI governor

Reserve Bank of India Governor Bimal Jalan has said that the current level of Indian rupee at Rs 39.50-55 per US dollar is reasonable.

Addressing a press conference in Bombay, Dr Jalan today said that the market condition were ideally congenial to relax the measures that were taken by RBI on December 2 to curb excessive speculative activities in the market.

He said that the results arising out of the measures were satisfactory and successful and the speculative activities had reduced substantially by around 50 per cent.

On December 2, the RBI had taken a series of measures to mop up excessive liquidity from the foreign exchange market which include raising of short-term interest rates and cancellation of forward contract by corporate sector.

Asked about the RBI intervention policy to defend the Indian currency, Dr Jalan said, "I do not have a target to keep the rupee at certain level. Our intervention would be guided by the market forces."

The RBI measures were not aimed at affecting the medium- and long-term interests but to bring stability and healthy atmosphere in the foreign exchange markets, he said.

While the genuine trade-related demands for the US dollar would be met by RBI in case of any crisis, Dr Jalan said that the central bank would be watching the market activity very closely in the next few weeks before taking any decision on relaxing certain measures.

He said the economic fundamentals were very strong with low levels of inflation rate and also low current account deficits. The foreign exchange reserves would be higher at US dollar 23.8 billion by the end of 1997 even after making almost all the public debt payment on behalf of the government to the tune of US $2.2 billion for the current year. All the payments were made through the market and a small sum of US $800 million would be paid in the next three months.

Asked about the RBI inspections undertaken in eight banks which had reportedly indulged in speculations about a fortnight ago, he said no violation of regulation was found by RBI officials and their transactions were permitted under the laws.

RELATED REPORT: Rupee falls 18 paise, RBI stays away

UNI