"On a review of the scheme, it has been decided that 50 per cent of the balances in the Exchange Earners` Foreign Currency Account (EEFC) accounts should be converted forthwith into rupee balances and credited to the rupee accounts as per the directions of the account holder," RBI said in a notification.
In respect of all future forex earnings, an exchange earner is eligible to retain 50 per cent (as against the previous limit of 100 per cent) in non-interest bearing EEFC accounts, it said. The balance 50 per cent shall be surrendered for conversion to rupee balances, it added. As per the existing rules, an exporter is allowed to retain 100 per cent of their earning into foreign currency.
EEFC is an account maintained in foreign currency with a bank. It is a facility provided to the foreign exchange earners, including exporters, to credit 100 per cent of their foreign exchange earnings to the account. The account holders do not have to convert foreign exchange into Rupees and vice versa, thereby minimising the transaction costs.
Following a series of actions by the central bank, the rupee today recovered by a hefty 60 paise to 53.24 against the US dollar in early trade from yesterday`s close of 53.82. "The move will definitely prop the rupee which is very visible today. With this, the RBI is clearly indicating that it does not want to sell the dollar to support the local unit but it prefers policy level actions," India Forex Advisors chief executive Abhishek Goenka said. The step will release at least USD 2.5 billion into the system out of the USD 5 billion with the exchange earners` forex account, Goenka said.
However, he added, "These measures alone will not arrest the decline and the rupee will continue to fall because of the fundamentals. I see the rupee hitting 54 soon." Meanwhile, in a separate notification, RBI said it has been decided to fix the intra-day open position, or daylight limit of the banks, at 5 times the net overnight open position limit available to them or the existing intra-day open position limit as approved by the RBI, whichever is higher, for positions involving Rupee as one of the currencies.
The RBI tightened norms for utilisation of the foreign currency fixed deposit funds in bid to check outflow of forex on Wednesday. The fund could be used by banks for lending to only those entities with risk management policy for managing the exchange rate volatility. "Accordingly, it has been decided that the FCNR(B) funds representing deposit liabilities may be utilised for making loans to resident constituents for meeting their foreign exchange requirements," RBI had said. It can be only used for the rupee working capital or capital expenditure needs of exporters or corporates who have a natural hedge or a risk management policy for managing the exchange risk, it had said.