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Govt mulls NRI bonds: What are these and how will they support rupee?

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Indian government and the Reserve Bank of India (RBI) are looking for all possible ways to stem any further slide in rupee, which hit a historic low of 72.67 against the US dollar on Monday.

Govt mulls NRI bonds: What are these and how will they support rupee?
Indian government and the Reserve Bank of India (RBI) are looking for all possible ways to stem any further slide in rupee, which hit a historic low of 72.67 against the US dollar on Monday.
According to a report by news wire PTI, the finance ministry in working closely with the central bank for a possible market intervention.
The RBI does have a number of instruments it can use to support the currency, including selling dollars in foreign-exchange markets and by raising interest rates.
Another tool at its disposal is to raise capital through NRI bonds, a measure implemented by the RBI during 2013 when rupee fell to 67.85. It has become a go-to in times of currency stress.
So what are these NRI bonds?
The NRI bonds are issued exclusively to Indians who stay overseas, giving them incentives to invest in an instrument with limited availability. These bonds pay back in domestic denominated currency (in this case rupee) rather than a hard currency such as the US dollars.
These bonds offer discounts to NRIs but offer low yields and have a maturity period of three years. As of 2017, a reported $69 billion inflow of money entered India, according to website Investopedia.
When were the NRI bonds issued last?
In 2013, when the rupee fell to Rs 67.85 against the greenback due to US Federal Reserve’s ‘taper tantrums’, the central bank came up with NRI bonds moved $26 billion through Foreign Currency Non-Resident Bank Account (FCNR-B) deposits, PTI reported.
Will the RBI issue it this time?
Raising forex through NRI bonds is not a preferred option as large outflow at the time of redemption could create problem for external sector, multiple experts told PTI.
An inflow of foreign exchange through NRI bonds may also see a significant outflow at the time of redemption which could create a problem for external sector.

Market Movers

CompanyPriceChng%Chng
ICICI Bank676.65 20.70 3.16
ITC212.40 5.40 2.61
Wipro599.15 14.95 2.56
SBI Life Insura1,050.45 24.45 2.38
SBI428.90 6.85 1.62
CompanyPriceChng%Chng
ICICI Bank676.65 20.85 3.18
ITC212.35 5.30 2.56
SBI429.15 7.15 1.69
HCL Tech994.25 15.65 1.60
Axis Bank755.25 8.75 1.17
CompanyPriceChng%Chng
ICICI Bank676.65 20.70 3.16
ITC212.40 5.40 2.61
Wipro599.15 14.95 2.56
SBI Life Insura1,050.45 24.45 2.38
SBI428.90 6.85 1.62
CompanyPriceChng%Chng
ICICI Bank676.65 20.85 3.18
ITC212.35 5.30 2.56
SBI429.15 7.15 1.69
HCL Tech994.25 15.65 1.60
Axis Bank755.25 8.75 1.17

Currency

CompanyPriceChng%Chng
Dollar-Rupee74.4000-0.0600-0.08
Euro-Rupee87.5450-0.0830-0.09
Pound-Rupee102.3880-0.0780-0.08
Rupee-100 Yen0.6730-0.0030-0.44