In order to realize export earnings, the RBI allowed Indian exporters to establish foreign exchange accounts with banks outside of India in January.
To provide exporters additional flexibility, the Reserve Bank of India (RBI) has decided to increase the repatriation time for export revenues in International Financial Services Centre (IFSC) banking unit accounts from one month to three months.
When making the monetary policy decision on October 1, RBI governor Sanjay Malhotra said, “It has now been decided to increase the time limit for repatriation, from one month to three months, in case of such foreign currency accounts kept in IFSC in India.”
In order to realize export earnings, the central bank permitted exporters to establish foreign exchange accounts in banks outside of India in January. The money in these accounts must be repatriated by the end of the next month from the date of receipt, otherwise it may be used to pay for imports.
The central bank will soon announce the changes to the rules. According to Malhotra, the move would boost IFSC’s foreign exchange liquidity and entice Indian exporters to establish accounts with its banking branches.
The repo rate remained constant
The monetary policy committee (MPC) of the RBI maintained the benchmark repo rate at 5.5 percent. However, the central bank increased its GDP projection for the current fiscal year from its earlier estimate of 6.5 percent to 6.8 percent.
The decision was consistent with a Moneycontrol survey of bankers and economists that forecasted the RBI would maintain rates while taking stock of the first quarter’s stronger growth and evaluating the data on the Goods and Services Tax (GST) changes.
The RBI reduced its annual inflation prediction from its initial estimate of 3.1 percent to 2.6 percent. According to Malhotra, the MPC said that reduced food costs and tax rate cuts had made the inflation outlook more benign.