More steps to help rupee: RBI limits foreign exchange outflows by resident Indians
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The Reserve Bank of India (RBI) on Wednesday announced measures to reduce foreign exchange outflows byresident Indians in the latest of a slew of measures intended to support the battered rupee.
"The present set of measures is aimed at moderating outflows," the RBI said in a statement. RBI has cut the limit for overseas direct investments (ODI) under the automatic route for all new transactions by 75 per cent. The limit has been reduced from 400% of the net worth of an Indian Party to 100% of its net worth.
RBI added the reduced limit would also apply to remittances made by Indian companies setting up unincorporated entities outside of the country in the energy and natural resources sectors, but would not apply toONGC Videsh Ltd, the foreign unit of Oil andNatural Gas Corp, or Oil India Ltd.
The central bank also reduced the limit for remittances made by resident individuals under the liberalised remittance scheme to $75,000 from $200,000 per financial year. "Resident Individuals have, however, now been allowed to set up Joint Venture (JV)/Wholly Owned Subsidiary (WOS) outside India under the ODI route within the revised LRS limit," said the central bank.
The RBI also said use of remittances for purchases of property outside India would not be allowed. "The present set of measures is aimed at moderating outflows. However, any genuine requirement beyond these limits will continue to be considered by RBI under the approval route," the bank added.
The rupee weakened on Wednesday as sustained dollar demand from importers, especially oil firms, weighed, while the sudden jump in headline inflation in July to a five-month high also hurt sentiment.
Traders also cited disappointment about the piecemeal approach to providing details afterFinance Minister P. Chidambaram on Monday unveiled a slew of broad measures to curb imports and attract capital inflows.
The government on Tuesday announced hikes in import duties for gold and silver, but it has yet to unveil other details such as its plan to tax imports of non-essential items. (Economic Times)
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