The rupee slumped 22 paise to hit a record low of 79.48 against the U.S. dollar on Monday, tracking weakness in domestic equity markets.
The local currency opened at 79.30 against the US dollar at the interbank forex market and witnessed an intra-day high of 79.24 and a low of 79.49 amid a stronger greenback.
It finally closed at 79.48, down 22 paise over its previous close of 79.26.
Foreign brokerage Nomura expects the Indian rupee to fall to 82 against the dollar by the third quarter of 2022 amid unrelenting capital outflows and widening trade deficit. Nomura expects the local currency to rise to 81 in the fourth quarter.
India's current account deficit is expected to further widen to 3.3% in the financial year 2022-23 from 1.2% in FY22, according to Nomura. The latest measures taken by the government on curbing gold imports by raising the import tax to 15% and export tax on petroleum products may not help in reining in the widening trade gap, the brokerage said.
Meanwhile, the Reserve Bank of India (RBI) has decided to put in place an additional arrangement for invoicing, payment, and settlement of exports/imports in the Indian rupee.
This is being done to promote growth of global trade with emphasis on exports from India and to support the increasing interest of the global trading community in INR.
"Before putting in place this mechanism, AD (authorised dealer) banks shall require prior approval from the Foreign Exchange Department of Reserve Bank of India, Central Office at Mumbai," the central bank says.
As per the new framework, all exports and imports under this arrangement may be denominated and invoiced in rupee and exchange rate between the currencies of the two trading partner countries may be market determined.
Indian importers undertaking imports through this mechanism shall make payment in INR, which shall be credited into the "Special Vostro account" of the correspondent bank of the partner country, against the invoices for the supply of goods or services from the overseas seller/supplier, the RBI says.
Similarly, Indian exporters, undertaking exports of goods and services through this mechanism, shall be paid the export proceeds in INR from the balances in the designated Special Vostro account of the correspondent bank of the partner country, the RBI adds.
"The bank of a partner country may approach an AD (authorised dealer) bank in India for opening of Special INR VOSTRO account. The AD bank will seek approval from the Reserve Bank with details of the arrangement," the banking regulator says.
Rupee surplus balance held may be used for permissible capital and current account transactions in accordance with mutual agreement, the RBI says.