The Reserve Bank of India (RBI) has allowed exporters to access the foreign exchange market without having to first exhaust funds in their foreign currency accounts.
In May 2012, RBI asked exporters to access foreign exchange only after fully utilising funds in exporter accounts at a time when the rupee was falling sharply.
“Keeping in view the operational difficulties faced by the account holders and banks, as a measure of rationalization, it has been decided to dispense with the stipulation,” RBI said making a reference to its earlier circular which was issued in May.
The move is expected to give smaller companies more flexibility in converting their dollar payments and receipts.
Earlier, Exchange Earner's Foreign Currency (EEFC) account holders were not allowed to access the forex market for purchasing foreign exchange before after utilizing fully the available balances in the EEFC accounts. This restriction was imposed as the curb the falling rupee which later hit a life time low.
Some of the market participants, however, saw the move as the central bank’s comfort with the currency levels.
“What it means is the RBI's comfort on rupee. RBI's comfort will extend to market stake holders; analysts who were looking for run-away weakens in rupee into 58-60 need to get to the drawing board for review," said Moses Harding, head of asset-liability management at IndusInd Bank.
While the rupee has strengthened in January, the central bank largely remained at the sidelines by not intervening in the foreign exchange market. The rupee has gained almost 2.5% against the dollar in January on sustained foreign inflows. Foreign fund inflows continued to pour into India's equity markets in January, totaling nearly $3 billion at last count, with the country's shares hovering at two-year highs.
The rupee snapped two sessions of losses and closed the day at 53.67 a dollar as compared to 53.81 of yesterday’s closing.