RBI partially relaxes overseas investment curbs, intervenes to support rupee

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September 4, 2013

MUMBAI: The rupee recovered sharply on Wednesday as the Reserve Bank of India (RBI) aggressively sold dollars to prevent the currency from falling to a record low amid volatility in global markets over the US push for limited US strikes on Syria.

September 4, 2013

MUMBAI: The rupee recovered sharply on Wednesday as the Reserve Bank of India (RBI) aggressively sold dollars to prevent the currency from falling to a record low amid volatility in global markets over the US push for limited US strikes on Syria.

Traders also cited hopes that Raghuram Rajan, who takes over at the RBI on Wednesday, will bring a new approach to the central bank's defence of the rupee, which has so far relied on a risky strategy to drain cash and raise short-term interest rates.

The central bank was seen selling dollars consistently when the rupee would approach the record low of 68.86 hit on August 28.

"Whenever the RBI moved out of the market, we saw a sudden uptick in USD/INR and they again came in to sell. They have been very aggressive today," a senior dealer with a state-run bank said.

The partially convertible rupee was trading at the day's high of 66.80/81 per dollar at 11:35am (0605 GMT), stronger than its close of 67.63/64 on Tuesday.

RBI partially relaxes overseas investment curbs

The Reserve Bank of India on Wednesday partially relaxed some of the restrictions imposed last month on capital outflows from residents, including allowing Indian companies more leeway if they are raising funds via external commercial borrowings.

Companies raising ECBs will be allowed to invest up to 400 percent of their net worth abroad. The RBI had last month reduced the overseas direct investment limit to 100 percent of a company's net worth for all companies, except for a few state-run firms.

The RBI also clarified on Wednesday that overseas direct investment limits would not be applicable on commitments made on or before August 14.

The RBI also said the restriction of 100 percent of net worth shall not apply to financial commitments funded out of exporters' forex account or if funds are raised via either American or global depositary receipts.


Courtesy: Reuters