MUMBAI: The RBI has announced a slew of temporary measures to boost forex flows into the country, which has witnessed foreign portfolio investors selling Indian shares amid a burgeoning current account deficit, in turn weakening the rupee.
Doubling the external commercial borrowing (ECB) limit under the automatic route to $1.5 bn up to December 31, 2022 and exempting foreign currency non-resident and non-resident external rupee deposits mobilised through November 4, 2022 from CRR and SLR requirements are the most important.
ECBs are foreign debt availed of by an eligible entity in India for commercial purposes. “It has now been decided to temporarily increase the limit under the automatic route from $ 750 million or its equivalent per financial year to US$ 1.5 billion,” the RBI release said.
“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.” Loans including bank loans, floating/ fixed-rate notes/ bonds/ debentures (other than fully and compulsorily convertible instruments); trade credits beyond three years, foreign currency convertible bonds (FCCBs) and foreign currency exchangeable bonds (FCEBs) and financial leases are forms of ECBs permitted by the RBI. Further, banks are required to include all Foreign Currency Non-Resident (Bank) [FCNR(B)] and Non-Resident (External) Rupee (NRE) deposit liabilities for computation of Net Demand and Time Liabilities (NDTL) for maintenance of CRR (4.5%) and SLR (18%).
“It has been decided that with effect from the reporting fortnight beginning July 30, 2022 incremental FCNR(B) and NRE deposits with reference base date of July 1, 2022 will be exempt from the maintenance of CRR and SLR,” RBI said.