The Reserve Bank of India on 6th June 2022, has decided to undertake measures listed below to enhance forex inflows while ensuring overall macroeconomic and financial stability. The following measures have been taken, in wake of the rupee depreciation by 4.1 per cent against the US dollar during the current financial year so far amid the ongoing geopolitical tensions.
Beginning July 30, 2022 incremental Foreign Currency Non-Resident (Bank) [FCNR(B) and Non-Resident (External) Rupee (NRE) deposits with reference base date of July 1, 2022 will be exempt from the maintenance of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). This relaxation will be available for deposits mobilised up to November 4, 2022. Transfers from Non-Resident (Ordinary) (NRO) accounts to NRE accounts shall not qualify for the relaxation.
RBI has decided to temporarily permit banks to raise fresh FCNR(B) and NRE deposits without reference to the extant regulations on interest rates, with effect from July 7, 2022. This relaxation will be available for the period up to October 31, 2022. At present, interest rates on Foreign Currency Non-Resident Bank [FCNR(B)] deposits are subject to ceilings of Overnight Alternative Reference Rate (ARR) for the respective currency/swap plus 250 basis points for deposits of 1 year to less than 3 years maturity and overnight ARR plus 350 basis points for deposits of 3 years and above and up to 5 years maturity. In case of NRE deposits, as per extant instructions, interest rates shall not be higher than those offered by the banks on comparable domestic rupee term deposits.
As part of the macroprudential framework under the MTF, FPIs can invest only in corporate debt instruments with a residual maturity of at least one year. It has been decided that FPIs will be provided with a limited window till October 31, 2022 during which they can invest in corporate money market instruments viz., commercial paper and non-convertible debentures with an original maturity of up to one year.
Under the automatic External Commercial Borrowings(ECB) route, eligible borrowers are allowed to raise funds through their AD banks, without approaching the RBI, as long as the borrowing is in conformity with the prudential parameters of the ECB framework such as all-in cost ceiling, minimum maturity requirements and the overall dynamic ceiling. It has now been decided to temporarily increase the limit under the automatic route from US$ 750 million or its equivalent per financial year to US$ 1.5 billion. The all-in cost ceiling under the ECB framework is also being raised by 100 basis points, subject to the borrower being of investment grade rating. The above dispensations are available up to December 31, 2022.
