RBI steps up firefighting

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Mumbai, Nov 15: with immediate effect.

Currently, the interest rate ceiling on NR(E)RA is set at Libor/Swap rates plus 100 basis points for US dollar of corresponding maturities. RBI has now been decided to increase the interest rate ceiling on NR(E)RA deposits by a further 75 basis points, i.e., to Libor/Swap rates plus 175 basis points with immediate effect. "With the rates on NRE and FCNR deposits getting slashed, we can now expect more capital inflows into the economy, thereby reducing RBI intervention in the forex market. We expect rupee to touch 48.60-70 levels against the dollar on Monday,” says NS Venkatesh, MD&CEO of IDBI Gilts.

Also the special term repo facility, introduced for the purpose of meeting the liquidity requirements of MFs and NBFCs will continue till end-March 2009. Banks can avail of this facility either on incremental or on rollover basis within their entitlement of up to 1.5 per cent of NDTL. “The special window open for MFs and NBFCs, should help them in a big way. Already we are seeing redemption pressures getting eased for the mutual fund industry,” Venkatesh adds.

RBI has decided to allow, as a temporary measure, housing finance companies (HFCs) registered with the National Housing Bank (NHB) to raise short-term foreign currency borrowings under the approval route, subject to their complying with prudential norms laid down by the NHB. Details in this regard are being notified separately.

In view of the difficulties being faced by exporters on account of the weakening of external demand, it has been decided to extend the period of entitlement of the first slab of pre-shipment rupee export credit, currently available at a concessional interest rate ceiling of the benchmark prime lending rate (BPLR) minus 2.5 percentage points from 180 days to 270 days with immediate effect.

At present, the export credit refinance (ECR) limit is fixed at 15 % of the outstanding rupee export credit eligible for refinance as at the end of the second preceding fortnight. The aggregate limit of ECR is currently around Rs 9,500 crore.