..........The inter-bank forex market would immediately drop within the said band. Why is RBI not taking such a step? Possibly, the RBI is a little uncertain that such an action would deplete forex reserves of the country (hovering around $290 billion) with the belief that authorised dealers would be on a dollar-buying spree at the rate of Rs 49.40. Such a belief is unfounded. India continues to be a highly-regulated forex market. Authorised dealers have to be square or near square in respect of their forex positions as at the close of business hours each day. RBI also prescribes overnight limit of forex position for each bank. No authorised dealer can buy forex from RBI and offload it in the international forex market...........
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