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Exporters welcomed the Reserve Bank of India’s move to relax norms on foreign exchange earnings and forwards contracts.
Mr M. Rafeeque Ahmed, President, Federation of Indian Export Organisations (FIEO), said in a statement that restoration of the stipulation allowing exporters to retain all their forex earnings in their Exchange Earners Foreign Currency accounts will benefit gems and jewellery, electronics, petroleum and plastics sectors as well as merchant trade.
The RBI’s move to allow exporters to cancel and rebook contracts to the extent of 25 per cent of the total contracts booked for hedging will provide flexibility to exporters, he said.
The move will enable exporters to rebook the contract that are often a result of the buyer cancelling a scheduled remittance due to demand/supply and pricing in the international market, he added.
The RBI had earlier tightened these norms during periods of severe rupee volatility.
Mr Ahmed, however, was concerned over the RBI’s decision of not lowering interest rates as it would hit investments and industrial production. The status quo in key policy rates may further contract the capital goods segment, he said.
He added that the central bank’s decision to reduce the amount that banks must hold in Government bonds by one percentage point (to 23 per cent) should release liquidity of Rs 55,000 crore into the system.
FIEO also demanded that a Committee be set up to assess the export credit requirements vis-a-vis the availability of funds for the MSME sector.
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