RBI raises overseas borrowing norms to improve forex inflows

The Reserve Bank of India (RBI) on Wednesday unveiled a host of steps to stimulate foreign exchange inflows in an effort to stop the rupee's decline. These measures included raising the overseas borrowing limits for businesses and liberalising the rules for foreign investments in government bonds.

The central bank announced the measures shortly after the end of the business day on Wednesday. It said that all capital flows, with the exception of portfolio investments, are stable and that an adequate amount of reserves acts as a buffer against external shocks. The cap on the interest rate that bankers can give on foreign deposits made by NRIs is one of the new steps.

The relaxation will be in force till October. The central bank has increased the External Commercial Borrowing  limit under the automatic route from USD 750 million or its equivalent per financial year to USD 1.5 billion and eased the norms for FPI investments in the debt market.

The all-in cost ceiling under the External Commercial Borrowing framework is also being raised by 100-bps, subject to the borrower being of investment grade rating. The above dispensations are available up to Dec 31, 2022. RBI  has permitted banks to raise fresh FCNR (B) and NRE deposits without reference to the extant regulations on interest rates till October 31, 2022. In the case of NRE deposits, as per extant instructions, interest rates shall not be higher than those offered by the banks on comparable domestic rupee term deposits.

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