India central bank steps in with measures to enhance forex inflows
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INDIA'S central bank on Wednesday (Jul 6) took a slew of measures to enhance foreign exchange inflows, including allowing overseas investors to buy short-term corporate debt and opening of more government securities under the fully accessible route.
The measures comes at a time when the Reserve Bank of India's (RBI) forex reserves have come down by nearly US$50 billion in the last 9 months, largely due to its intervention in the currency market to cap the fall of Indian rupee.
Indian rupee has lost about 6 per cent against the US dollar since the beginning of this year. The Indian currency was trading below 79.14/79.195 against the US dollar at 1154 GMT, close to its lifetime low of Tuesday.
RBI said it will allow foreign investors to buy 7-year and 14-year tenure government bonds without any upper limits, along with previously opened up 5, 10 and 30-year tenure securities.
India caps foreign investments in government securities and only those bonds under fully accessible route do not have limits.
RBI said it has been monitoring the liquidity conditions in the foreign exchange market and has stepped in as needed to alleviate the US dollar tightness with the objective of ensuring orderly market functioning.
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"It has been decided to undertake measures listed below to enhance forex inflows while ensuring overall macroeconomic and financial stability," the RBI said in its release.
RBI allowed banks to raise deposit rates for non-resident Indians to levels higher than prevailing domestic deposit rates for a limited period.
The banks can undertake deposits from non-resident Indians at higher rates from Jul 7 till Oct 31.
"These measures, including raising the borrowing limits for companies as well as liberalising offshore ownership in government debt, are intended to ease onshore US dollar tightness and support the rupee," said Radhika Rao, economist at DBS Bank.
The central bank also raised the external commercial annual borrowing limit for Indian corporates under the automatic route to US$1.5 billion per company from US$750 million. REUTERS
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