The Reserve Bank of India (RBI) has allowed exporters to access the foreign exchange market without having to first exhaust the funds in their foreign currency accounts. In May 2012, RBI had asked exporters to access the foreign exchange market only after utilising all the funds in exporter accounts.
“In view of the operational difficulties faced by account holders and banks, as a measure of rationalisation, it has been decided to dispense with the stipulation,” RBI said, referring to its previous circular. 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 weren’t allowed to access the forex market to purchase foreign exchange before fully utilising the available balances in EEFC accounts. This was aimed at curbing the rupee’s fall.
Some market participants saw today’s move as an indication of the central bank’s comfort with currency levels. “What it shows is RBI’s comfort on the rupee front. This comfort would extend to market stake holders; analysts who were looking for runaway weaknesses in the rupee to 58-60 have to get to the drawing board for a review,” said Moses Harding, head of asset-liability management at IndusInd Bank.
While the rupee has strengthened this month, the central bank largely remained at the sidelines and didn’t intervene in the foreign exchange market. Owing to sustained foreign inflows, this month, the rupee gained about 2.5 per cent against the dollar.
On Wednesday, the rupee snapped two sessions of losses, closing at 53.67/dollar, compared with yesterday’s close of 53.81/dollar.