New Delhi: An expert panel of the RBI has released a report on fuller convertibility on the capital account. The recommendations of this report, if accepted, will have far reaching consequences on the Indian financial system.
For example, it calls for lower government stake in PSU banks, and asks that Industrial banks be allowed in the Indian banking space, among other measures.
The report lays down a five-year roadmap, saying that the overall ECB ceiling and automatic approval ceiling should be gradually raised.
It proposes that ECBs of 10-year maturity in 06-07 and seven-year maturity in 07-08 should be outside ceiling, while end use restriction on ECBs should be removed for 06-07.
It further advocates the review of transaction limit of $20 million on import-linked loans. It asks for the revamping of import linked loan scheme to a unlimited borrowing. Further, the limits for corporate investment abroad should be doubled in phases.
It calls for prohibiting the FIIs from investing fresh money via P-notes (as participatory notes are commonly referred to) and recommends phasing out of existing P notes within one year.
It has recommended for allowing the non-resident corporates to invest in Indian equities via MFs & PMS. Non-multilateral foreign institutions, it suggests, should be allowed to raise rupee bonds; while banks' overseas borrowings should be linked to paid-up capital & free reserves.
The report advocates raising banks' overseas borrowings substantially to 100 per cent by 08-09. According to the report, Indian MFs' overseas investment limit should be doubled to $4 billion by 07-08, which should go up to $5 billion by 08-09.
Similarly, it says that Indian Portfolio Management Schemes should be allowed to invest abroad. Limit on individual foreign currency account overseas has also been proposed to be hiked to $200,000 by '08-09.
However, it has recommended abolition of unlimited individual investment in foreign companies with 10 per cent stake in Indian companies.
Comments
0 comment