The Reserve Bank of India (RBI), on Tuesday, decided to limit access to export credit refinance while compensating fully with a commensurate expansion of the market’s access to liquidity through a special term repo facility from the central bank (equivalent to 0.25 per cent).
It reduced the liquidity provided under the export credit refinance (ECR) facility from 50 per cent of eligible export credit outstanding to 32 per cent with immediate effect, while introducing a special term repo facility of 0.25 per cent “to compensate fully for the reduction in access to liquidity under the ECR with immediate effect.’’
The RBI said that this was “in pursuance of the Dr. Urjit R. Patel Committee’s recommendation to move away from sector-specific refinance towards a more generalised provision of system liquidity without preferential access to any particular sector or entity.”
“This should improve access to liquidity from the Reserve Bank for the system as a whole without the procedural formalities relating to documentary evidence, authorisation and verification associated with the ECR.
This should also improve the transmission of policy impulses across the interest rate spectrum and engender efficiency in cash/treasury management,” it added. The RBI also decided to continue to provide liquidity under 7-day and 14-day term repos of up to 0.75 per cent of the banking system.
This measure will continue to provide liquidity in the banking system.
With a view to improving the depth and liquidity in the domestic foreign exchange market, the RBI will now allow foreign portfolio investors to participate in the domestic exchange traded currency derivatives market to the extent of their underlying exposures plus an additional $10 million. Furthermore, it also decided to allow domestic entities similar access to the exchange traded currency derivatives market.
Also, in view of the recent stability in the foreign exchange market, it was decided to enhance the eligible limit for foreign exchange remittances under the liberalised remittance scheme (LRS) to $125,000 without end use restrictions except for prohibited foreign exchange transactions such as margin trading, lottery and the like. Earlier, as a prudential measure, the RBI had reduced it to $75,000 last year.
In order to facilitate travel requirements of non-residents visiting India, the RBI decided to allow all residents and non-residents except citizens of Pakistan and Bangladesh to take out Indian currency notes up to Rs.25,000 while leaving the country.
At present, only Indian residents are allowed to take Indian currency notes up to Rs.10,000 out of the country and non-residents visiting India are not permitted to carry any Indian currency notes while leaving the country.
