Steps taken by the RBI and the government of India to
stabilise the currency markets
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Issue
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Details
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Capital Outflow
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- The RBI reduced the
limit for outbound investment and remittances from India.
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Encouraging Capital
Inflows
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- RBI has removed
administrative restrictions on investment
schemes offered by banks
to non-resident Indians, and removed ceiling on interest rates on deposit accounts held by NRIs.
- The
government liberalised the FDI limits for 12 sectors, including oil and gas. A
Bill is pending in the Parliament to revise the FDI limit to 49% in the
insurance sector.
- RBI
increased the current overseas
borrowing limit for banks from
50% to 100%, and allowed it to be converted into rupees and hedged with the
RBI at concessional rate.
- RBI
also allowed banks to swap fresh NRI dollar
deposits with a minimum
duration of 3 years with the RBI.
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Limiting Imports and encouraging exports
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The Finance Ministry increased the customs duty on importing
precious metals including gold and platinum.
20%
of every lot of import of gold must be exclusively made available for
the purpose of export.
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Oil Import Needs
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- RBI decided to provide dollar liquidity to three public sector oil marketing companies (IOC, HPCL and BPCL) to help them meet their entire
daily dollar requirements.
- Government
is also considering increasing its import
of crude oil from Iran, and pay for it
directly in Indian rupees.
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Trade Deficit
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Ministry of Commerce is exploring the possibility of
using local currency for
trade with major trading partners.
RBI
allowed exporters and importers more flexibility in management of their forward currency contracts.
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Curbing Speculative in currency
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- RBI increased the short-term
emergency borrowing rates for banks.
- The
daily holding requirements under the Cash
Reserve Ratio for banks have
been modified.
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International Cooperation
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- Government increased its currency swap limit with Japan from USD15 billion to USD50 billion.
- The
BRICS nations also agreed on a USD100 billion foreign currency reserve pool as part
of their plan to create a BRICS New
Development Bank.
- India will
contribute $18 billion to this fund from its reserves.
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Source: Reserve Bank of India
