RBI to exporters: Convert 50 pc of FX holdings into rupees

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SME Times News Bureau | 10 May, 2012
The Reserve Bank of India (RBI) Thursday asked exporters to convert at least 50 percent of their foreign exchange (FX) holdings in rupee, a move seen to prop up the battered currency, which hit a record closing low of 53.83 against the US dollar on Wednesday.

In a new circular related to the Exchange Earner's Foreign Currency (EEFC) account, the central bank directed exporters to concert at least half of their holding in rupee.

"Fifty percent of the balances in the EEFC accounts should be converted forthwith into rupee balances and credited to the rupee accounts as per the directions of the account holder," the RBI said in the circular.

This process has to be completed within a fortnight.

The move is estimated to lead conversion of around USD 3 billion of foreign currency, especially the US dollar, into Indian rupee.

The rupee strengthened to 52.95 against a dollar Thursday after the Reserve Bank intervention.

The partially convertible rupee fell to a record closing low of 53.83 against the US dollar Wednesday. The previous closing low was recorded at 53.72 against a dollar on Dec 14 last year.

"In respect of all future forex earnings, an exchange earner is eligible to retain 50 percent (as against the previous limit of 100 percent) in non-interest bearing EEFC accounts. The balance 50 percent shall be surrendered for conversion to rupee balances," the RBI said.

RBI said the review of the Exchange Earner's Foreign Currency account scheme is intended to enable exchange earners to save on conversion/transaction costs while undertaking forex transactions in future.

"This facility is not intended to enable exchange earners to maintain assets in foreign currency, as India is still not fully convertible on Capital Account," the central bank said.