RBI cuts exporters’ forex holdings by half to prop up rupee

The Reserve Bank of India (RBI) has made it mandatory for all exporters to convert 50 per cent of their forex holdings in exchange earner's foreign currency (EEFC) account within 14 day's of their receipt, thereby propping up the sagging rupee.

''Fifty per cent of the balances in the EEFC accounts should be converted forthwith into rupee balances and credited to the rupee accounts as per the directions of the account holder. This process may be completed within a fortnight from the date of the circular and compliance reported to the chief general manager, foreign exchange department,'' RBI said in a notification issued today.

Further, RBI said, in respect of all future forex earnings, all exchange earners or exporters have to surrender 50 per cent of their foreign exchange earnings for conversion into rupee.

An exchange earner can now only retain 50 per cent of his foreign exchange earnings in non-interest bearing EEFC accounts as against 100 per cent allowed so far.

The measure had its effect on the rupee, which gained as much as 83 paise, rising to 52.95 a dollar in the morning trade against its Wednesday's close of 53.82 a dollar. The rupee, however, pared gains later, falling to 53.22 against the dollar since the dollar volumes turned out to be lower than expected.

Traders have put initial forex holdings on sale at around $2.5 billion to $3 billion.