RBI steps to boost capital inflows into country: Experts

NEW DELHI: A slew of measures taken by the Reserve Bank to arrest rupee slide will help improve capital inflows as well as stem fall in the domestic currency, experts said today.

"These measures will help enhance capital inflows into the country. It will also have some effect on the rupee," Prime Minister's Economic Advisory Council chairman C Rangarajan said.

The rupee had plunged to its all-time low of 57.37 against the US dollar last week, the biggest fall of 85 paise in a day this year, because of increased demand from oil importers.

However, steps taken by RBI will take time to give results, Rangarajan said.

Ratings agency Crisil's chief economist D K Joshi said, "I think the measures will have no immediate effect".

The move is aimed at boosting foreign inflows into the country. However, it will also depend on risk appetite of foreign investors and global economic environment, he said.

RBI today raised the FII limit in government bonds by USD 5 billion to USD 20 billion and allowed the Indian companies to avail external commercial borrowings up to USD 10 billion for repayment of rupee loans and fresh capital requirement.

However, RBI has restricted the facility to companies engaged only in manufacturing and infrastructure and with consistent foreign exchange earning during the past three years.

The measures would come into force with immediate effect, RBI said in a notification.

KPMG India Parter Rohit Bammi said that the RBI steps would have a limited impact on the spot rupee level.
""While the increase in the government bonds limit is certainly beneficial for the bond markets in the medium term, the ECB announcements are unlikely to have any meaningful impact on the rupee level in the near-term," Bammi said.

On the whole, if these announcements represent the sum total of all government policy action, then investors have not been appropriately addressed, he said in a statement.

RBI today relaxed investment norms for qualified foreign investors and allowed them to invest in the mutual fund schemes that hold at least 25 per cent of their assets either in debt or equity or both in the infrastructure sector.

However, it said that this relaxation would be subject to review.