Tags:
Journalism of Courage
MUMBAI, SEP 30: The Reserve Bank of India RBI has decided not to scrap the Exchange Earners8217; Foreign Currency EEFC for exporters but said it is reviewing part of it.
The EEFC facility allows exporters to keep a part of the proceeds from their export sales in foreign currency-denominated accounts. Clarifying its stand in the EEFC scheme for exporters, the RBI has stated that there has been no proposal of scrapping the scheme.
The bank said that as pointed out earlier by Deputy Governor Jagdish Capoor some exporters had expressed a need for continuation of the scheme. quot;The various features of the scheme were therefore currently under review,quot; it said.
Dealers and analysts said the latest central bank statements will put pressure on the rupee on Tuesday when trading resumes after a national holiday on October 2. The currency, convertible only on the current account, firmed on Capoor8217;s statements on Friday trade as dealers interpreted his comments to Reuters as a step towards dropping the facility. On Thursday evening, after close of trading, Capoor had said the scheme was under review but a final decision about the viability of the facility had yet to be taken.
Dealers hoped dollar supplies of 1 billion to 1.5 billion from scrapping the scheme. The rupee closed Friday firmer at 46.03/04 compared to its previous close of 46.095/105 per dollar. quot;I see the rupee weakening to 46.20 on Tuesday and the pressure on the rupee to ease further will rise further on these statements. I feel the facility should have been dropped as this is being exploited by a few exporters,quot; said a banker.
The rupee has already weakened nearly six per cent since January. Last month, the RBI, in a bid to support the rupee, instructed exporters to reduce balances held in EEFC accounts by 50 percent of the amount outstanding on August 11.
It also said it would permit future accretions only up to 50 percent of the present amounts eligible and these additions would have to be maintained in current or savings accounts. The move netted inflows worth 850 million, which helped beef up forex reserves 8212; already down nearly eight per cent from their mid-April peak of 38.34 billion.
Dealers said persistent protests led mainly by Indian software exporters might have prompted the central bank to retain the scheme. Software, one of India8217;s aggressively growing sectors, accounted for exports worth 4 billion in 1999/2000 April-March and is expected to reach 6.3 billion in 2000/01.
Last month, the National Association of Software and Services Companies NASSCOM had protested the central bank8217;s move to reduce exporters8217; foreign currency holdings.
