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Highlights of Annual Monitory Policy
for the year 2007-08
Dr. Y.V. Reddy, Governor of RBI has presented the annual monitory
policy for the year 2007 - 08 on 24th April 2007. Highlights of the same, which
are for corporate interest, are as follows,
Highlights
- FCNR interest rate
ceiling reduced by 50bp to Libor minus 75bp
- NRE interest rate
ceiling reduced by 50bp to Swap rates
- Working groups set up
to facilitate development of Interest Rate and Currency Futures
markets
- Overseas investment
limit for Indian cos. In Joint Ventures raised from 200% to 300% of net
worth
- Portfolio investment
by listed Indian companieslisted overseas, raised from 25% to 35% of net
worth
- Ceiling on aggregate
investments by Mutual Funds increased from $ 3 billion to $ 4 billion
- Prepayment of ECB
(External Commercial Borrowings) without RBI permission increased from $
300million to $ 400million
- 75% (earlier 50%) of
the forward contracts by importers and exporters must be on deliverable
basis
- Forward contracts for
hedging overseas direct investment can be freely cancelled and rebooked
- Small and Medium
Enterprises permitted to book forward contracts without underlying
exposure or past records
- Present limit for
individuals for any permitted current or capital account transaction increased
from $ 50,000 to $ 100,000 per financial year in the liberalized
remittance scheme.
Review of Monitory Policy
We can say that this policy is
mainly to control Inflation, for maintain a stable growth rather extend the
growth period for years to come. Due to huge foreign exchange reserve (USD 200
billion app) and present inflation rate it will be difficult for RBI to
intervene into the currency market by buying USD to protect USD further, as for
the same RBI has to sellINR (Indian Rupees) which is towards inflationary, as
more INR will be infused into the market. We expect the depth of Indian
Currency market will be more in
near future, when currency future will start in India in near
future.
RBI wants the Indian corporate to become global, and RBI has taken
necessary steps for one-steps forward towards capital account convertibility.
The author of this update may be contacted at
debasishmitra@yahoo.com