RBI liberalises norms to boost forex inflows, shore up falling Rupee

The Reserve Bank of India on Wednesday announced measures to diversify and expand the sources of forex funding with an aim to mitigate volatility and dampen global spillovers, including letting foreign investors invest in short-term corporate debt and allowing the purchase of more government securities under the fully accessible route.

The measures taken by the central bank come against the backdrop of the Rupee depreciating by 4.1% against the US dollar during the current financial year so far (up to July 5) amid the ongoing geopolitical tensions.

“The global outlook is clouded by recession risks. Consequently, high risk aversion has gripped financial markets, producing surges of volatility, sell-offs of risk assets and large spillovers, including flights to safety and safe haven demand for the US dollar. As a result, emerging market economies are facing retrenchment of portfolio flows and persistent downward pressures on their currencies," the RBI said while announcing the new measures to boost forex inflows.


Foreign currency non-resident deposits [FCNR(B) and NRE deposits] will be exempt from the maintenance of cash reserve ratio (CRR) and statutory liquidity ratio (SLR).

The relaxation will be available for deposits mobilised up to November 04, 2022. However, transfers from Non-Resident (Ordinary) (NRO) accounts to NRE accounts shall not qualify for the relaxation, the RBI said.

Banks will be permitted to raise fresh FCNR (B) and NRE deposits without being subject to current interest rate caps.

The limit for external commercial borrowings under the automatic route has been raised to $1.5 billion from $750 million or its equivalent per financial year.

The all-in cost ceiling under the ECB framework is being raised by 100 bps, subject to the borrower being of investment-grade rating.

Banks will be able to utilise overseas foreign currency borrowings for lending in foreign currency to entities for a wider set of end-use purposes, subject to the negative list set out for external commercial borrowings, RBI said.

The measures also include easing norms for FPI investment in the debt market.