Reserve Bank of India (RBI) Current Affairs

RBI Doubles the FOREX Remittance Limit under Liberalised Remittance Scheme (LRS)

The Reserve Bank of India (RBI) in its monetary policy review has enhanced the limit for foreign exchange (FOREX) remittances under Liberalised Remittance Scheme (LRS) to $250,000 (Rs. 1.5 crore) per person per year.

This limit was doubled compared to earlier limit of $125,000 per person per year.

Under the LRS, Indians can open, maintain and hold foreign currency accounts with banks outside India for carrying out transactions, without permission from the RBI.

Background

RBI has taken this decision after reviewing the external sector outlook as India’s foreign exchange reserves touched all-time high at $322.135 billion in mid-January 2015 and further exercise in macro prudential management.

Earlier in 2013, RBI had reduced the limit for FOREX remittances under this scheme to $75,000 as the rupee came under strong pressure. But later, in June 2014, it was again raised the limit to $125,000 (Rs. 75 lakh).

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RBI keeps key rates unchanged but changes statutory liquidity ratio

The Reserve Bank of India (RBI) has announced sixth Bi-Monthly Monetary Policy Statement.

In its bi-monthly monetary policy statement, RBI has not changed its main lending rate i.e.Repo Rate and cash reserve ratio (CRR). But changed statutory liquidity ratio (SLR) of scheduled commercial banks.

On the basis of an assessment of the current and evolving macroeconomic situation, RBI has been decided to:

  • Repo rate- kept the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 7.75 per cent.
  • Cash reserve ratio (CRR) – kept the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0 per cent of net demand and time liabilities (NDTL).
  • Statutory liquidity ratio (SLR) – reduced the SLR of scheduled commercial banks by 50 basis points from 22.0 per cent to 21.5 per cent of their NDTL.
  • Reverse repo rate under the LAF – remains unchanged at 6.75 per cent.
  • Marginal standing facility (MSF) rate- remains unchanged at 8.75 per cent.
  • Bank Rate – remains unchanged at 8.75 per cent.

Earlier on 15 January 2015, RBI had changed repo rate by 25 basis points from 8.0 percent to 7.75 percent.

Statutory Liquidity Ratio: SLR refers to the proportion of its total NDTL that the bank has to maintain in form of liquid assets. These liquid assets can either be cash or gold or unencumbered government securities. This directly affects the proportion of funds that the bank can lend.

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