The RBI on Thursday raised the annual limit of FCCBs for companies to $750 million under the automatic route, up from $500 million in a fiscal year, to help Indian corporate across all segments access higher quantum of overseas funds and also encourage greater inflow of foreign exchange
Mumbai: The Reserve Bank of India (RBI) on Thursday raised the annual limit of Foreign Currency Convertible Bonds (FCCBs) for companies to $750 million under the automatic route, which does not require prior permission from it, reports PTI.
The limit, up from $500 million in a fiscal year, will not only help Indian corporate across all segments access higher quantum of overseas funds but also encourage greater inflow of foreign exchange.
“...eligible borrowers under the automatic route can raise FCCBs up to $750 million or equivalent per financial year for permissible end-uses,” the Reserve Bank said in a circular.
Corporates in specified service sectors like hotels, hospitals and software, can raise FCCBs up to $200 million subject to the condition that the proceeds would not be used for acquisition of land.
RBI’s decision comes a few months after the government decided to relax norms on External Commercial Borrowings (ECBs). In September, the limit of ECBs with tenure of five years or more under the automatic route was increased from $500 million to $750 million.
For the services sector, the ECB limit under automatic route was doubled to $200 million and for NGOs from $5 million to $10 million.
This was done following suggestions made by top industry leaders at a meeting with finance minister Pranab Mukherjee to boost the economy.
The RBI circular further said, “... it is clarified that the ECB/FCCB availed of for the purpose of refinancing the existing outstanding FCCB will be reckoned as part of the limit of $750 million available under the automatic route as per the extant norms.”
It also said henceforth ECBs of up to $20 million or equivalent in a financial year will have a minimum average maturity of three years, while for ECBs of $20-$750 million the average maturity would be of five years.
“Accordingly, the requirement of average maturity period, prepayment and call/put options... (for additional amount of $250 million) has been dispensed with,” the circular said.
The equation between growth and inflation in India has become much more balanced in the last few months and interest rates were unlikely to rise further, a popular business television channel quoted RBI deputy governor Subir Gokarn as saying in an interview
Singapore: Reserve Bank of India (RBI) deputy governor Subir Gokarn on Thursday said interest rates are unlikely to rise further but the Reserve Bank of India may intervene in the forex market because of the rupee volatility, reports PTI.
The equation between growth and inflation in India has become much more balanced in the last few months and interest rates were unlikely to rise further, a popular business television channel quoted Mr Gokarn as saying in an interview.
“Growth risks obviously have come back into a much larger consideration based on what we’ve seen in the past few months,” CNBC quoted Mr Gokarn as saying.
The monetary policy had “reached the peak of the cycle”, said Mr Gokarn, who had addressed a regional outlook forum by Institute of South East Asian Studies of Singapore.
He said RBI would intervene in the forex market to reduce volatility in the rupee exchange rate, rather than to defend a particular rate.
The rupee had stabilised in recent weeks and was trading much closer to the real effective exchange rate against a basket of currencies tracked by RBI, he said.
The next level of exchange rate would depend on the foreign capital inflow which calls for boosting investor confidence by addressing the country’s fiscal deficit and infrastructure problems.
The rupee has fallen 16% against the US dollar during the past year despite RBI’s intervention through state banks, according to reports.
While bankers and experts expect the lending rate to fall by about one percentage point in the near-term, the Prime Minister’s Economic Advisory Council has strongly pitched for rate cut by the RBI in its monetary policy review later in the month
New Delhi: Auto and home loan borrowers can expect some relief soon as banks and the Reserve Bank of India (RBI) are likely to go for a one percentage point cut in interest rates in the backdrop of falling inflation, reports PTI.
While bankers and experts expect the lending rate to fall by about one percentage point in the near-term, the Prime Minister’s Economic Advisory Council (PMEAC) has strongly pitched for rate cut by the RBI in its monetary policy review later in the month.
“There is every possibility of a decline in interest rates... unless some major events take place, interest rates should come down by at least 100 basis points,” Union Bank of India chairman and managing director MV Nair said here.
The base rate of commercial banks, according to RBI data, ranges from 10% to 10.75%.
The trend for the monetary strategy going forward, according to experts, is expected to be set by the RBI in its third quarterly monetary policy review on 24th January.
The RBI, which has increased key rates 13 times since March 2010 had indicated in its December policy review that it could reverse the tight monetary policy stance in case inflation remains under control.
Food inflation, according to the latest data, fell into the negative zone in the week ended 24th December, at (-)3.36%.
With regard to headline inflation, it fell from 9.73% in October to 9.11% in November and is expected to decline further.
“I expect headline inflation could come down even below 7% by March-end... The environment appears to be in favour of the RBI reversing its monetary policy stance,” PMEAC chairman C Rangarajan said.
Earlier this week, RBI governor D Subbarao said interest rates have peaked and are set to ease from now on.
“From here on, we could expect reversal of monetary tightening. But it’s difficult to say when that will take place and in what shape it will roll out,” Mr Subbarao had told the BBC.
India Inc has blamed high interest rates, which have led to an increase in the cost of fresh borrowing, for hindering fresh investment and industrial growth.
Economic growth during the second quarter (July- September) stood at 6.9%, the lowest in over two years. Industrial production declined by 5.1% in October.
“We expect the repo rate to be reduced in Q2, 2012.
However, the RBI may cut the Cash Reserve Ratio (CRR) in the January policy meeting,” Standard Chartered Bank economist Anubhuti Sahay said.