Deregulation of Interest Rates on Export Credit in Foreign Currency
May 21, 2012
Members of the Council.
Sub : Deregulation of Interest Rates on Export Credit in Foreign Currency
On a review of developments in the global financial markets and current macro-economic conditions, the Reserve Bank has taken the following measures to ease foreign currency flows as also to enhance the availability of export credit in foreign currency:
- Interest rate ceiling on Foreign Currency Non-Resident [FCNR (B)] deposits of banks has been raised from 125 basis points (bps) above the corresponding LIBOR/Swap rates to 200 bps for maturity period of 1 year to less than 3 years, and to 300 bps for maturity period of 3 to 5 years (RBI has issued Circulars No. 565 dated 17.5.2012 and No. 535 dated 4.5.2012 in this regard).
- The ceiling rate on export credit in foreign currency which was constraining the availability of credit to exporters in foreign currency has been deregulated by allowing banks to freely determine their interest rates on such credit ( RBI has issued Circular No. 534 dated 4.5.2012 in this regard).
The above measures are aimed at augmenting foreign currency inflows to banks which in turn would facilitate their foreign currency loans to exporters. These measures will come into effect from May 5, 2012.
The aforesaid RBI circulars are enclosed herewith.
Members may kindly note the above
D. Saalai Maraan
COUNCIL FOR LEATHER EXPORTS