RBI relaxes rules to boost inflow of funds to support Rupee

RBI relaxes rules to boost inflow of funds to support RupeeIndia's central bank, the Researve Bank of India has relaxed its regulations to allow companies to borrow abroad and it also increased interest rates for Indians living aboard in order to help contain the fall in the Indian rupee.

The RBI said in a statement that companies in the country can now pay as much as 3.5 percentage points over the London Interbank Offered Rate for loans longer than three years and up to five years. This is an increase of 0.5 percentage point on loans. The RBI also increased the interest by 25 basis points and 100 basis points for two different deposit plans.

The Indian Rupee has continued its downward slide and recorded a decline of 1.1 percent to 52.70 per dollar. The weak performance by the Indian currency is due to continuing weak performance by domestic shares and high demand for the American currency from importers. Some now expect the rupee to move to an even weaker position of 54 to 56 per dollar.

According to dealers in the foreign exchange market, the rupee will continue to fall until there is an inflow of funds into the country or there is stability in the Eurozone courtiers. The eurozone is facing a sovereign debt crisis with Greece among the most hit but the crisis is not threatening to spread to larger economies of Italy and Spain.

The RBI is trying to contain the fall in what is now the Asia's worst-performing currency. Analysts expect the RBI to take more such steps as the global uncertainties are not expected to end soon.