A forked tongue is no support.

In mid July the Reserve Bank increased the Marginal Standing Facility rate to 10.25% from 8.25% if any bank borrowed in excess of Rs 750 billion from the RBI. This was to tighten liquidity in banks to restrict them from buying dollars and so putting downward pressure on the rupee. The RBI also announced mopping up money by selling bonds and through Open Market Operations. Livemint, 16 July. All these measures were taken to support the rupee at a time when it was 60 to the dollar. Immediately treacherous politicians rushed out proclaiming to media channels that these measures were temporary and would be reversed very soon giving the impression that the government had no respect for the RBI and was ready to undermine its efforts. Then on 13 August the Chairman of the RBI, Duvvuri Subbarao himself said that " perhaps " the Cash Reserve Ratio and the Statutory Liquidity Ratio need to come down. ET, 13 August. These are funds that banks are mandated to set aside in case of sudden unforeseen demand for cash. What Mr Subbarao was saying was that he wanted to increase liquidity in banks. Sure enough early this week the RBI announced that it would infuse Rs 80 billion worth of liquidity by buying government bonds through OMO. Livemint, 21 August. This was apparently to shore up bond prices and bring down yields and thus reduce the interest the government has to pay on its borrowings. The question is why is the RBI squirming like a fish on a hook and why is it trying to help the government instead of doing what is good for the nation? Then on 14 August the RBI announced controls on currency transactions. So far Indians were allowed to take $200,000 dollars abroad for investment, study or buying properties but from now on they will be allowed only Rs 75,000 and will not be allowed to buy properties abroad. RBI note, 14 August. Of, course with the rupee down to 65 to the dollar very few, except billionaires, can afford to buy dollars. The RBI also reduced the amount companies could invest abroad from 400% of net worth to 100% of net worth. These were signs of pure panic and markets reacted by selling the rupee. Guess what? Our most revered Finance Minister is at it again. He denied that the RBI or the government wants currency control. Seems that they have no idea that markets do not trust those with forked tongues. You can lie to the aam aadmi but not to everyone.