News: Indian Credit Policy - More convertibility now

(Agencies 31/10/2006) Mumbai - The Reserve Bank of India on Tuesday allowed resident individuals would be free to remit up to $50,000 per financial year as against the earlier limit of $25,000.

"Foreign exchange earners may retain up to 100% of their foreign exchange earnings in their Exchange Earners’ Foreign Currency accounts."

"Authorised dealer banks may borrow funds from their overseas branches and correspondent banks (including borrowing for export credit, external commercial borrowings (ECBs) and overdrafts from their Head Office/Nostro account) up to a limit of 50 per cent of their unimpaired Tier I capital or $10 million, whichever is higher.

"Borrowers eligible for accessing ECBs can avail of an additional $250 million with average maturity of more than 10 years under the approval route.

"Prepayment of ECB up to $300 million without prior approval of the Reserve Bank.

"Authorised dealer banks may allow remittances on behalf of their customers up to 15 per cent of the average annual sales/income or turnover during the last two financial years or up to 25 per cent of their net worth, whichever is higher, for initial expenses, and remittances up to 10 per cent of the average annual sales/income or turnover during the last two financial years for recurring expenses. They may also permit remittances for acquisition of immovable property for the overseas office, within these limits.

"The existing limit of $2 billion on investments in Government securities by foreign institutional investors (FIIs) to be enhanced in phases to $3.2 billion by March 31, 2007.

"The extant ceiling of overseas investment by mutual funds of $2 billion is enhanced to US $ 3 billion.

"Importers to be permitted to book forward contracts for their customs duty component of imports.

"FIIs to be allowed to rebook a part of the cancelled forward contracts.

"Forward contracts booked by exporters and importers in excess of 50 per cent of the eligible limit to be on deliverable basis and cannot be cancelled.

Authorised dealer banks to be permitted to issue guarantees/letters of credit for import of services up to $1 lakh for securing a direct contractual liability arising out of a contract between a resident and a non-resident.