INR outperforming in the wake of RBI meeting with government - TDS

Analysts at TD Securities note that after a marathon 9 hour board meeting yesterday the RBI and Indian government appeared to come to an agreement on the use of RBI reserves and a review of its assessment of state banks NPLs.

Key Quotes

“The RBI will set up of a committee to examine reserves management. This does not automatically mean reserves will be utilised by the government, thus alleviating some market fears.”

“RBI will also consider measures to restructure stressed loans to meet a risk weighted capital adequacy ratio.”

“INR is outperforming in the wake of the board meeting, with RBI appearing to have gone some, albeit not all the way towards appeasing the government in its demands. The fact that this has happened without resignations or intensifying friction is a relief for markets.”