RBI: Liberalisation in Capital Account Transactions

The Reserve Bank of India has taken measures to liberalise the
process with respect to certain types of current account transactions. The measures
announced include the following:
– manufacturing and infrastructure companies can avail of external
commercial borrowings (ECB) to repay rupee loans towards capital expenditure;
this is under the approval route with an overall ceiling of USD 10 billion (RBI
circular here);
and
– enhancement of the limit of USD 15 billion for FII investment in
Government securities by USD 5 billion to USD 20 billion; broad-basing the non-resident
investor base in Government securities, by including investors such as  Sovereign
Wealth Funds (SWFs), Multilateral agencies, endowment funds, insurance funds,
pension funds and foreign Central Banks to be registered with SEBI
(RBI
circular here).

It remains to be seen
how far such measures will help boost economic growth in general and also
arrest the slide in the value of the Rupee.

About the author

Umakanth Varottil

Umakanth Varottil is an Associate Professor at the Faculty of Law, National University of Singapore. He specializes in corporate law and governance, mergers and acquisitions and cross-border investments. Prior to his foray into academia, Umakanth was a partner at a pre-eminent law firm in India.

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