Foreign Trips Get a Fillip

8226;Earlier this month, the RBI doubled the basic travel quota BTQ for travellers to 10,000 from 5,000 earlier.
8226;The RBI also permitted FIIs to hedge their entire exposure in Indian equities and also raised the limit for banks8217; investments in overseas money market investments.
8226;The central bank has also informed foreign banks that they will soon be permitted to hedge their capital in India.
8226;Importers will be allowed to make advance remittance of up to 100,000 without prior approval from the central bank, against the earlier limit of 25,000.

8220;In fact, the central bank has been progressively relaxing the regulations governing the forex transactions. This indicates full convertibility on the capital account will soon become a reality. If it happens, the entire scenario will change,8221; said Arvind Shah, a Mumbai-based travel agency owner. While many countries, especially European countries and the US, have already full float of their currencies, India and some Asian countries have been going slow in free exchange of currencies.

Foreign travellers are finding the recent relaxation music to their ears. Until now dealers were allowed to remit foreign currency for purchases of passes and tickets from India but the payments had to be adjusted against the traveller8217;s BTQ. 8220;Now the RBI has made it outside the BTQ. This is additional bonanza for frequent travellers8230; especially business visitors,8221; said a Mumbai-based businessmen. However, another frequent traveller said: 8220;though this is a step in the right direction, it would not make any material difference as most travellers do not use the basic travel limit of 10,000.8221;

8220;There were days when the RBI used to allot only 500 per visit. The days after the 1991 forex crisis were very tough,8221; said another business traveller. Bankers feel that the current high level of forex reserves will be a cushion for any sudden outflow of forex.

The current round of relaxation will also go a long way in boosting the inflow foreign investments in the markets. Currently, FIIs are permitted to enter into forward contracts to hedge exposure up to 15 per cent of the market value of the equity as on March 31, 1999 plus the increase in market value/inflows thereafter. Now the RBI has said that they will be allowed to hedge their equity exposures without any reference to the cut-off date. However, the condition that the forward contracts, once cancelled, cannot be re-booked, will continue. The confidence of the regulator on the forex front is visible on the relaxation in advance remittance to 1,00,000 from 25,000.

If the government is able to bring down the fiscal deficit under control, the country can move fast to the full convertibility on the capital account. Travellers and investors, brace up for the new era of full float of the rupee.