Mumbai, July 6 The RBI on Wednesday raised overseas borrowing limits for companies and liberalised
Mumbai, July 6
The RBI on Wednesday raised overseas borrowing limits for companies and liberalised norms for foreign investments in government bonds as it announced a slew of measures to boost foreign exchange inflows in efforts to curb the fall of the rupee.
Unveiling measures soon after the close of financial markets on Wednesday, the central bank said all capital flows barring portfolio investments remain stable and an adequate level of reserves provides a buffer against external shocks.
Among the fresh steps, the cap has been removed on interest rate that lenders can offer on foreign deposits by NRIs. The relaxation will be in force till October.
The rupee has depreciated by 4.1% against the US dollar during the current financial year so far (up to July 5), “which is modest relative to other EMEs and even major Advanced Economies (AEs),” the RBI said.
India’s foreign exchange reserves stood at $593.3 billion as on June 24, 2022, supplemented by a substantial stock of net forward assets, the central bank said.
According to the statement, RBI has been closely and continuously monitoring the liquidity conditions in the forex market and has stepped in as needed in all its segments to alleviate dollar tightness with the objective of ensuring orderly market functioning.
“In order to further diversify and expand the sources of forex funding so as to mitigate volatility and dampen global spillovers, it has been decided to undertake measures… to enhance forex inflows while ensuring overall macroeconomic and financial stability,” it said.
The RBI has increased the External Commercial Borrowing (ECB) limit under the automatic route from $750 million or its equivalent per financial year to $1.5 billion and eased the norms for FPI investments in the debt market. The all-in cost ceiling under the ECB framework is also being raised by 100 basis points, subject to the borrower being of investment grade rating. The above dispensations are available up to December 31, 2022, as per the statement. — PTI
Major announcements
- Cap on paying interest rate on Foreign Currency Non-Resident Bank [FCNR (B)] and NRE deposits removed
- Banks too have been incentivised to mobilise Foreign Currency Non-Resident Bank and NRE deposits
- They have been exempted from the mandatory Cash Reserve Ratio and Statutory Liquidity Ratio on incremental foreign currency deposits
- Fund limit under the automatic External Commercial Borrowing route doubled to $1.5 billion from $750 million
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