Policy decision to strengthen Indian currency against dollar
New Delhi/Mumbai: In a major strategic economic decision to bolster the Indian rupee that has, of late, floundered against the US dollar, the Reserve Bank of India (RBI) today ordered the banks across the country to increase by at least four basic points the rupee symbol font size that they use in all their official communications.
Consequent to the new policy decision, ‘the rupee symbol cannot be statutorily used in point sizes less than 18’, the RBI Governor Dr D Subbarao told a news conference here.
The previously used point size was not more than ‘14’, and this seems to be one of the reasons why the rupee was constantly under pressure from the dollar, which derived its strength in the international market from the fact that it was used in a free size as it came as part of a variety of fonts family.
‘Importers too have been told to use the rupee in bold and bigger fonts in all their transactions so that the primacy of rupee can be ensured,’ Subbarao said.
Anybody found violating this new rule would be tried under the relevant section of the FERA (Fonts Exchange Regulation Act), the RBI Governor added.
This bold, and possibly game-changing, move from the RBI comes in the wake of the clamour from importers that the viability of their businesses was getting hit in the face of the sliding rupee (against the dollar, which is generally the common currency for international trade).
‘A strong rupee alone can help salvage the situation,’ a delegation of top importers in the country had recently told the RBI in a formal representation. ‘Now, in response to that, we have made the rupee not only stronger but bolder, too,’ pointed out the RBI Governor. ‘The importers can do business now confident that they are backed by a rupee that is bigger than ever before’.
The RBI, with its officially stated position of not indulging in the money markets to artificially shore up the Indian rupee, was hard-pressed to come up with a strategy to help the importers maintain their business efficacy.
Last year the RBI took a major gamble in the international money market by coming up with a symbol for the Indian rupee. It helped a great deal in establishing the primacy of the Indian rupee, which till then was like an item girl — no real face, and seen just as a commodity. ‘The move to introduce a symbol for the Indian rupee was, well, symbolic,’ the RBI Governor said ‘now we are adding substance to the symbol by opting for bigger sizes’.
Whenever there is a crisis it is the tradition of the RBI to increase or decrease something by some basic points. ‘Usually it’s interest rates. This time it happens to rupee font size,’ he said.
Dr Subbarao, a grizzled veteran in international money markets, expressed the confidence that the Indian rupee would be robust enough to handle the heavy pressure brought to bear upon by the bigger point size. ‘We in the RBI will, of course, be monitoring the situation closely. But it is fair to say that we have thrown the rupee to the deep end. It is for it to swim to safety,’ he added.
Reacting to the RBI move, Finance Minister Pranab Mukherjee said this signals the coming of age of rupee in the international markets. ‘I now look forward to the day when the rupee begins to enjoy the exalted status of being used to convey unparliamentary words that otherwise cannot get into print.’ (For example: ‘The finance ministry is managed by a bunch of F$^%$%$ morons’
Meanwhile, shares traded at both the Bombay Stock Exchange and the National Stock Exchange seems to be pretty lukewarm in their response to the RBI decision. ‘The fact that the shares seem unmoved by the central bank’s move is a little troublesome,’ said a top portfolio manager. ‘But we have to wait and watch whether the shares were unenthused by the new development or the fact that the RBI announcement has come on a Sunday,’ said the former IIM-A topper.
(Disclaimer: Who knows such a move may actually work because it is still better than the Finance Ministry’s response to the worrisome inflation levels, which is for the Finance Minister to chime, from time to time, ‘the inflation levels are worrisome’. But who knows, the FM’s whole idea maybe to just bore inflation to death.)