Reserve Bank of India has eased norms for NRI deposits and investments by FPIs in the backdrop of global uncertainties and the continuing weakness of the rupee against the US dollar. Accordingly RBI has brought in various measures inorder to boost the inflows. The foreign portfolio investors investments has been relaxed, the limits for external commercial borrowings has been raised.
Also the limit under automatic route for ECBs has been doubled from USD 750 million per financial year to USD 1.5 billion which will encourage companies in raising money through this route. Other measures are:
- Exemption to banks from Cash Reserve Ratio and Statutory Liquidity Ratio on all Foreign Currency Non-Resident (Bank) and Non-Resident (External) Rupee term deposits. These deposits will be without reference to the extant regulations on interest rates, which will push banks to raise fresh deposits from NRIs.
- FPIs are allowed access to more funds. To quote an example, it is decided that FPIs can invest in all new issuances of GSecs of 7-year and 14-year tenors including the current issuances of 7.10 per cent GS2029 and 7.54 percent GS 2036. Currently they can invest in Government Securities (G-Secs) with 5 year, 10 year and 30 year tenors.
- Further Forex funding is expanded and diversified through measures to enhance forex inflows while ensuring overall macroeconimic and financial stability.
Overall the move would ensure to attract NRI deposits and also reasonable FPI inflows into the bond market at the shorter end, and provide relief to supply laden market.
This moves comes just after the Finance ministry hiked duty on gold, slapped export tax on petrol, diesel and jet fuel and imposed a windfall tax on crude oil. It may be noted that rupee has depreciated by 4.1 per cent against USD so far till July this year and is modest when compared to other currencies.