Rupee at 59-60 is the right level, says P Chidambaram

Finance Minister P Chidambaram has said the right value of the rupee is 59-60 to a dollar and it should not overshoot that level.

The minister was talking to reporters after meeting exporters in Mumbai in late afternoon.

According to the real effective exchange rate of the rupee, "the right level of the rupee should be at 59-60 to American dollar and the currency should not overshoot that level," he said.

The rupee had been one of the worst-hit currencies among emerging markets and lost over 20 per cent against the dollar since the beginning of the financial year. Late in August, it plunged to a life-time low of 68.85 against the Greenback.

The rupee's trouble began after the US Federal Reserve hinted in late May that it may stop its $85 billion bond buyback programme sooner than expected, which led to a flight of capital back to the American shores from emerging markets, including India.

However, within the first fortnight of the new Reserve Bank of India (RBI) Governor Raghuram Rajan taking charge, the domestic unit regained more than 10 per cent of its lost value, only to lose a part of it, following the 0.25 per cent hike in repo rate on September 20.

When asked what he has offered to exporters, Chidambaram said export credit should be treated like priority sector lending and his Ministry is talking to the central bank about this.

"The Finance Ministry supports the idea of treating bank credit to exporters as priority sector lending; the Ministry is talking to the Reserve Bank on this."

Currently, priority sector lending (PSL), which comes at a cheaper rate, is limited to agriculture and other segments like MSMEs. RBI mandates domestic banks to set aside as much as 42 per cent of their total loan book towards PSL.