NEW DELHI: The government is confident that there is unlikely to be any sharp volatility in the exchange rate in the medium term and that it will manage the situation arising out of the redemption of foreign currency non-resident (FCNR) deposits raised by banks in 2013.
But authorities expect some volatility in the foreign exchange market when the market reopens on Monday due to RBI governor Raghuram Rajan’s decision against seeking a second term. Sources said both the central bank and the government were watching the situation.
According to estimates, outflows as a result of the redemption of the FCNR deposits could be about $20 billion. There are concerns that there could be shortage of dollars in the markets but the RBI has assured that it will ensure supply of the greenback in case of extreme volatility.
“There should be no concern. We are confident of dealing with the situation. Some of the redemptions have been covered through forwards and we expect some to be rolled over,” said a senior finance ministry official, who did not wish to be quoted.
Courtesy : Timesofindia.indiatimes.com