RBI announces forex inflow measures to curb risk

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Reserve bank of india on forex inflow
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The Reserve Bank of India (RBI) issued notifications covering a range of foreign investment options to increase foreign exchange inflows in response to a weakening rupee and a tightening of global financial conditions. Liberalisation of forex inflow will, according to the central bank, dampen global spillovers, ensuring greater financial stability for Indian markets.

The RBI introduced relaxations on cash reserve ratio and statutory liquidity ratio on incremental foreign currency non-resident accounts (banks) and non-resident external (NRE) term deposits. At the same time, the central bank was quick to point out that transfers from non-resident ordinary accounts into NRE accounts would not be deemed eligible for exemption.

The central bank also ensured an easing in foreign currency borrowings by boosting lending by authorised dealer category-I banks up to a limit of 100% of their unimpaired Tier 1 capital. The facility to raise such capital will be available until the end of October this year.

Eligible borrowers are also allowed to raise funds by way of external commercial borrowings (ECBs) through their authorised dealer banks as long as their borrowings are well within the framework of ECB regulations.

The RBI has also introduced a host of debt market instruments for foreign portfolio investors through medium-term framework, voluntary retention route and the fully accessible route.

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