Forex reserves don't work in absence of capital controls, says Acharya

In the case of Masala bonds, RBI's guidelines were more relaxed compared with ECB guidelines as the rupee-denominated bonds did not carry currency risk

Reserve Bank of India (RBI) Deputy Governor Viral Acharya said on Thursday that foreign exchange reserves do not work in the absence of macroprudential measures or some form of the capital controls, and that the depletion of reserves by short-term external debt can make the situation worse.
 
“Simply looking at reserves is inadequate and a potentially misleading indicator of vulnerability,” said Acharya at a presentation at the NSE-NYU Stern conference on Indian financial markets.
 
Macroprudential regulations made reserves effective, Acharya said, giving a presentation. Such measures, he said, included limiting the size of the flow, maturity of investors