According to a statement issued by the central bank, the foreign debt limit for companies has been increased. It also liberalized norms for foreign investment in government bonds, to increase foreign exchange inflows into the country.
The rupee has depreciated by 4.1 per cent against the US dollar during the current financial year so far. Whereas, in the last nine months, foreign exchange reserves have fallen by more than $ 40 billion.
However, the RBI continues to maintain that the rupee is in a better position than other global currencies.
“The depreciation of rupee is marginal relative to other EMEs and even major advanced economies (AEs),” RBI said.
The rupee stood at 79.3025 per dollar at the end of trading on Wednesday, having touched its record low of 79.3750 on Tuesday.
According to the statement, the RBI is closely and continuously monitoring the liquidity position in the foreign exchange market and has taken necessary steps in all its areas to ease the dollar tightness with a view to ensuring the orderly functioning of the market.
Here are the measures announced by RBI:
* The cap on interest rate offered by lenders on foreign deposits by NRIs has been removed till October.
* External commercial borrowing (ECB) limit under the automatic route has been increased from $750 million or its equivalent per financial year to $1.5 billion.
* The overall cost ceiling under the ECB framework has been raised to 100 basis points, provided the borrower is of investment grade rating.
* Banks can raise fresh FCNR(B) and NRE deposits from July 7 to October 31, without reference to the extant norms on interest rates.
* In case of NRE deposits, the interest rates offered by banks on comparable domestic rupee fixed deposits as per extant instructions shall not exceed.
* Banks are exempted from Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) on incremental FCNR (B) and NRE fixed deposits.
*All new issuances of G-Secs of 7-year and 14-year tenors, including the current issue of 7.10 per cent GS 2029 and 7.54 per cent GS 2036, will be designated as specified securities under the Fully Accessible Route (FAR).
* As part of the macro prudential framework under the Medium Term Framework (MTF), FPIs can invest only in corporate debt instruments with a residual maturity of at least one year.
* FPIs will be provided a limited window till October 31, 2022, during which they can invest in corporate money market instruments, commercial paper and non-convertible debentures with an original maturity of up to 1 year.
* FPIs can invest in government securities and corporate bonds through three channels: MTF; Voluntary Retention Route (VRR); and Fully Accessible Route (FAR)
‘India’s growth prospects strong’
RBI said that despite global constraints, India’s growth prospects remain strong and resilient.
“Despite geopolitical developments, higher crude oil prices and tighter external financial conditions, the high frequency indicators point to an ongoing recovery in several sectors,” RBI said.
It further said that the services-related Purchasing Managers’ Index (PMI) in June 2022 reached its highest level since April 2011 and the widening of the trade trade deficit in June 2022 underscores the strength of domestic demand.
India’s external sector has displayed resilience and viability on the back of strong exports of goods and services and rising remittances, the RBI said, adding that the current account deficit (CAD) is marginal.
(with inputs from agencies)