Reserve Bank’s policy response: analytics In view of the lower level of capital inflows, there were some pressures in the foreign exchange market. Consistent with its policy objective of maintaining orderly conditions in the foreign exchange market, the Reserve Bank sold foreign exchange in the market.
While foreign exchange sales attenuated the mismatch in the foreign exchange market, these operations drained liquidity from the rupee market and accentuated pressures on the rupee liquidity. Accordingly, the Reserve Bank has been pro-actively managing liquidity since midSeptember 2008 to assuage the liquidity pressures through a variety of measures.