‘Banks can borrow from multilateral bodies till Nov 30’

These borrowings from multilateral bodies will also be eligible for the recently opened forex swap facility.

Written by ENS Economic Bureau | Mumbai | Published: October 11, 2013 2:45 am

The Reserve Bank of India on Thursday allowed banks to raise funds from multilateral institutions until November 30 as long as the money raised is for general banking purposes and not for capital enhancement.

These borrowings from multilateral bodies will also be eligible for the recently opened forex swap facility.

The RBI set up a swap window for banks last month,offering to exchange foreign currency for rupees at below market rates for lenders that raise funds abroad. The action was a bid to prop up the rupee by attracting more capital into the country.

The central bank on Thursday also allowed banks to borrow from entities other than their own branches overseas under existing regulators for borrowing overseas.

Meanwhile,the RBI on Thursday said it has sold $9.2 billion in the foreign exchange spot market in July and August to stabilise the rupee. The central bank sold $3.2 billion in the forex spot market,and bought $724 million in August.

Moreover,in the forward dollar market,outstanding dollar sales rose to $9.05 billion in August from $4.7 billion a month ago. In July,the RBI had sold $6 billion in the forex spot market,and bought $50 million.

The rupee has rebounded by more than 11 percent since hitting a record low of 68.85 against the dollar on August 28 after being hammered earlier this year on concerns over India’s gaping current account deficit and expectations of reduced capital inflows to India once the US Federal Reserve starts to scale back its stimulus programme.

The RBI has been selling dollar in the forward and spot market to cushion the impact of its foreign exchange market intervention.

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