Reserve Bank of India (RBI) on Thursday issued notifications relaxing provisions for overseas investments in debt market and foreign currency lending by banks, measures which were announced as part of efforts to shore up the rupee.
The measures were announced on Wednesday amid the rupee falling against the US dollar.
Banks can utilise the funds raised from overseas foreign currency borrowing between July 8 and October 31, 2022 for lending in foreign currency to constituents in India, as per the notification on 'Overseas foreign currency borrowing of Authorised Dealer Category-I banks'.
At present, banks can undertake Overseas Foreign Currency Borrowing (OFCB) up to a limit of 100 per cent of their unimpaired Tier 1 capital or USD 10 million, whichever is higher. The funds so borrowed cannot be used for lending in foreign currency except for the purpose of export finance.
The measure, RBI said is expected to facilitate foreign currency borrowing by a larger set of borrowers who may find it difficult to directly access overseas markets.
The central bank has issued two other notifications related to investment by Foreign Portfolio Investors (FPIs) in debt instruments.
Investments by FPIs in government securities and corporate bonds made between July 8 and October 31, 2022 will be exempted from the limit on short-term investments till maturity or sale of such investments.
Currently, short-term investments by an FPI in government securities (central government securities, including treasury bills and state development loans) and corporate bonds should not exceed 30 per cent of the total investment of that FPI in any category.
Relaxation has also been provided for FPI investments in corporate bonds and they can now buy such instruments for less than one-year tenor.
The central bank had issued notifications regarding regarding relaxation interest rate on Foreign Currency (Non-resident) Accounts (Banks) Scheme and Non-Resident (External) Rupee (NRE) Deposit.
In its statement on Wednesday, RBI had said it has been closely and continuously monitoring the liquidity conditions in the forex market and has stepped in as needed in all its segments to alleviate dollar tightness with the objective of ensuring orderly market functioning.