The Reserve Bank of India has decided to keep in abeyance
measures announced in October 2006 for greater liberalisation
of external commercial borrowings, indicating a further
tightening of the credit policy.
In view of the prevailing market conditions and the likely
impact on liquidity, the central bank said, it has decided
to keep in abeyance the operationalisation of new norms
for overseas foreign currency borrowings by authorised
dealer banks, announced on October 31, 2006.
RBI, in October 2006, had proposed doubling the limit
of borrowing by the authorised dealers from their overseas
branches and corresponding banks (including for financing
export credit, ECBs and overdrafts) to 50 per cent of
the unimpaired Tier 1 capital subject to a cap of $10
The notification has come into effect on April 23,on the
eve of the central bank''s annual credit policy for 2007-08.
A further liberalisation of foreign exchange inflow would
increase liquidity in the system leading to a rise in
rupee value and adding to inflationary pressure, RBI said.
The rupee, which recorded a gain of two per cent in March
touching a nine-year high against the dollar, is further
gaining strength and is nearing the 40-per-dollar range.
has been trying to contain inflation by tightening monetary
policies is likely to continue with the tough measures
to check liquidity growth and prevent further rise in
the value of rupee.