RBI liberalises norms to boost forex inflows

The Reserve Bank of India (RBI) on Wednesday liberalized criteria to boost foreign exchange inflows, including doubling the borrowing limit under the European Central Bank’s trajectory, amid the rupee’s decline against the US dollar.

In a statement, the Central Bank said that it has been closely and continuously monitoring the liquidity conditions in the forex market and has intervened as needed in all its sectors to alleviate the scarcity of the dollar with the aim of ensuring orderly functioning of the market.

The actions taken by the central bank come on the back of the 4.1 percent depreciation of the rupee against the US dollar during the current fiscal year so far (until July 5) amid ongoing geopolitical tensions.

The central bank said that “in order to further diversify and expand sources of foreign exchange financing to mitigate volatility and mitigate global spillovers,” it has decided to take five measures to boost foreign exchange flows while ensuring macroeconomic and financial stability.

Measures include easing rules on FDI investing in the debt market, and increasing the foreign trade borrowing (ECB) limit under the automatic path from $750 million or its equivalent in the fiscal year to $1.5 billion.

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