RBI Take More Steps On Liquidity, Credit

Concerned over fast depleting foreign exchange reserves, the Reserve Bank today announced a slew of measures, including permission to housing finance firms to raise funds from overseas markets and raising the interest rate ceiling on foreign currency deposits.

The Reserve Bank has also raised the time-limit for availing low-cost export (pre-shipment) credit from 180 days to 270 days to encourage exports and promised to take more measures if necessary.

In addition, the central bank also permitted Indian banks to offer better interest rates for foreign currency deposits by the non-residents.

Henceforth, the banks can offer rates up to 100 basis points over London Interbank Offered Rate (LIBOR) under Foreign Currency Non-Resident (Banks) scheme and 175 basis over LIBOR on Non-Resident (External) Rupee Accounts deposits.

These changes will encourage the banks to make the non- resident deposit schemes more attractive by raising interest rates.

The measures by the central bank are aimed at shoring up foreign exchange reserves, which according to the latest data, have slipped to about $251 billion from a high of $314 billion in April-May.

RBI had earlier pumped in around Rs 2.70 lakh crore liquidity into the banking system in order to augment domestic and forex liquidity and to enable the banks to continue to lend for productive purposes and maintain growth momentum.

In order to ensure more liquidity for the real estate sector, RBI allowed the registered housing finance companies to raise short-term funds from overseas markets.

Courtesy : BT