Tight liquidity comes to haunt banks again

On the other hand, the foreign exchange kitty of the country is shrinking fast. Forex reserves fell by a whopping 15.47 billion last week 8212; one of the steepest falls in recent years 8212; to 258.41 billion, mainly due to the RBI interventiion in the forex market to prevent a slide in the rupee value. The RBI normally sells dollars from its forex kitty to check a fall in the rupee value. The rupee has been under pressure due to heavy withdrawals by foreign institutional investors FIIs from the Indian stock market. With this, the forex kitty has plunged by over 51.3 billion since March this year. 8220;The rupee had plunged below the 50 level for the first time last week. The RBI was selling dollars heavily to bring the rupee back from the 50 levels. Bankers say heavy dollar sales by the RBI has added to the tight liquidity position.