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RBI Relaxes NRI Deposit Norms; Aims Increased Currency Reserves

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RBI Relaxes NRI Deposit Norms; Aims Increased Currency Reserves
07 Jul 2022
6 min read

News Synopsis

The Reserve Bank of India (RBI) claimed that in order to reduce volatility and dampen global spillovers, it has taken the necessary efforts to further diversify and extend the sources of foreign exchange funding.

As per the central bank sources, India has foreign exchange reserves worth $593.3 billion, which were bolstered by a sizable stock of net forward assets.

In order to maintain the Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) by the banks, the RBI has removed additional Foreign Currency Non-Resident Bank (FCNR-B) and Non-Resident (external) Rupee (NRE) deposit liabilities from the computation of Net Demand and Time Liabilities (NDTL).

The RBI stated, "For deposits mobilised up until November 4, 2022, this relaxation will be accessible. The relaxation shall not apply to transfers from Non-Resident (Ordinary) (NRO) accounts to NRE accounts".

Additionally, with effect starting on July 7, 2022, it was decided to temporarily allow banks to raise new FCNR(B) and NRE deposits without taking into account the current interest rate regulations. The time frame for this relaxation is from now through October 31, 2022.

By enabling all new government securities (G-Secs) issuances of 7-year and 14-year tenors, including the present issuances of 7.10% GS 2029 and 7.54% GS 2036 under the Fully Accessible Route, the RBI also loosened regulations governing foreign portfolio investment in debt (FAR).

Furthermore, it was determined that up to 30% of investments made by FPIs in corporate debt and government securities up until October 31, 2022, would be excluded from the macroprudential short-term limit.

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