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We hereby highlight the main measures adopted by the Reserve Bank of India to ensure liquidity for Indian companies from external sources in the months ahead.

A negative outlook on the growth of the global economy, a high rate of volatility and the stringent measures taken in the USA and Europe to contain inflation are causing foreign investors to withdraw funds made available in emerging markets (EM). In particular, the increase of the interest rate by the Federal Reserve is making dollar storage attractive in this uncertain period. To safeguard liquidity in the foreign currency market, slow down the outflow of foreign funds from India, and ensure market stability, the Reserve Bank of India (RBI) announced several measures in its press release of the 6th July 2022, including the following measures aimed at foreign funding.

INCREASE IN ANNUAL LIMIT ON FOREIGN FUNDING (ECB) 

The RBI has temporarily increased the limit on foreign financing through the automatic route from USD 750 million per annum (or equivalent) to USD 1.5 billion per annum (or equivalent), subject to compliance with the other provisions set out in the ECB Framework Regulation and the Foreign Exchange Management Rules (Borrowing and Lending). The increased limit will be available to eligible entities until the 31st December 2022. 

INCREASED LIMIT ON BORROWING COSTS

The “all-in cost” (interest rates, other fees, charges, guarantee fees and export credit agency charges) has been increased by 100 basis points for all ECBs made available until 31 December 2022, provided the entity has an “investment grade” rating of BBB- or higher issued by an Indian rating agency.