By Shoaib Rahman, Reuters India’s rupee plunged as the central bank cleared a whopping Rs 3.6 lakh crore of recapitalisations at the end of June.
The benchmark rupee fell as much as 8% against the dollar to 70.15 per dollar on the New York Mercantile Exchange, according to Reuters data.
The country’s central bank said it would keep interest rates on hold at 3.5%.
The rupee rose to 74.20 from 74.14 on Friday as markets looked for any signs of an upturn in the economy, with economists expecting growth of 7.6% in 2018.
The government is keen to boost economic growth in the country, which is the world’s biggest economy by gross domestic product.
The RBI, India’s central banker, said in a statement on Friday that it was completing a recapitalization of the government-controlled banks.
The banks are to recapitalise on a cashless basis, which the central banks is not allowed to do under existing laws, it said.
The central bank has been working for a long time to clear recapitalised banks.
The central bank’s decision to take the step in the face of a sharp slowdown in economic growth has sparked concern among investors and investors.
The rupees’ slide is due to a sharp fall in the value of foreign exchange reserves, which had increased in recent months.
India’s central banks currency reserves have been on a sharp decline, with the government’s central-bank balance sheet now at about $4.6 trillion.
Last month, the RBI announced the creation of a new regulator to deal with issues of high and low interest rates and the issue of liquidity for banks.