Economic Affairs Secretary Ajay Seth on Thursday said the measures taken by the Reserve Bank of India (RBI) would increase inflows of overseas funds and help strengthen the rupee against the U.S. dollar.
The RBI had on Wednesday raised the overseas borrowing limits for companies and liberalised norms for foreign investments in government bonds as it announced a slew of measures to boost foreign exchange inflows.
Mr. Seth said RBI’s measures, including on External Commercial Borrowings (ECB), were transitory and for shorter duration, and would help boost foreign currency flows into the country.
The RBI had on Wednesday increased the ECB limit under the automatic route from $750 million or its equivalent per financial year to $1.5 billion and eased norms for foreign portfolio investments in the debt market.
Mr. Seth also expressed hope that the global challenges would subside in the short term.
The central bank had said that all capital flows barring portfolio investments remained stable and an adequate level of reserves provided a buffer against external shocks.
As part of the changes, the cap on the interest rate that lenders can offer on foreign deposits by NRIs has been removed. The relaxation will be in force till October.
Since the war in Ukraine broke out in late February, RBI has dipped into its foreign exchange reserves to shield the rupee from steep depreciation. Since February 25, the headline foreign exchange reserves have declined by $40.94 billion.
The rupee has depreciated 4.1% against the U.S. dollar during the current financial year so far (up to July 5). However, the dip is modest relative to other emerging market and even major advanced economies.