The Reserve Bank Monday relaxed norms for external commercial borrowings (ECBs) by reducing the mandatory hedging provision to 70 per cent from the current 100 per cent.
The Reserve Bank Monday relaxed norms for external commercial borrowings (ECBs) by reducing the mandatory hedging provision to 70 per cent from the current 100 per cent.
The relaxed norms will apply to the ECBs with a maturity period between 3 and 5 years, the central bank said in a notification.
"On a further review of the extant provisions, it has been decided, in consultation with the Government of India, to reduce the mandatory hedge coverage from 100 per cent to 70 per cent for ECBs raised under Track I of the ECB framework..." it said.
Further, the RBI also clarified that the ECBs raised prior to this circular will be required to mandatorily roll over their existing hedge only to the extent of 70 per cent of outstanding ECB exposure.
According to the RBI, Track I refers to medium-term foreign currency-denominated ECB with a minimum average maturity of 3-5 years.
Meanwhile, it's being reported that the Reserve Bank has "more than adequate" reserves and that it can transfer over Rs 1 trillion to the government after a specially constituted panel identifies the "excess capital".
An RBI board meeting had last Monday decided to form a committee, which is likely to be announced later this week."We expect the proposed committee on the RBI's economic capital framework (ECF) to identify Rs 1-3 trillion which is 0.5-1.6 per cent of GDP as excess capital," analysts at Bank of America Merrill Lynch said in a note Monday.The brokerage report said as per its stress tests, the central bank can transfer Rs 1 trillion to the government if the transfer is limited to passing excess contingency reserve and can go up to Rs 3 trillion if the total capital is included.
Giving a break-up, the report said Rs 1.05 trillion can be transferred if the contingency reserve is capped at 3.5 percent of the RBI book. It further said this level will be 75 percent higher than the average of BRICS economies, excluding India.Additional forms of transfers can include Rs 1.16 trillion from the contingency reserves if one restricts to yield rise of 4.5 percent as against 9 percent at present.Limiting the appreciation cover in RBI's currency and gold revaluation account to 25 percent (Rs 53.25 per USD) will release about Rs 72,000 crore to the government, it said.
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 "RBI relaxes norms for external commercial borrowings")
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