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FCNR funds to be invested in foreign securities

Mumbai, Nov. 6: An increasingly confident Reserve Bank of India (RBI) has allowed banks to invest unutilised foreign currency non-resident (FCNR-B) funds in the overseas markets in long-term fixed income securities rated a notch lower than highest safety by leading global rating agencies. Earlier, banks could invest only in long-term securities with highest safety ratings by international agencies.

The RBI, in a circular dated November 2, has stated that authorised dealers in the foreign exchange market can “invest undeployed FCNR-B funds in overseas markets in long-term fixed income securities rated at least ‘AA’ by Standard & Poors, or ‘Aa3’ by Moody’s or ‘AA’ by Fitch IBCA.

In the past few weeks, the RBI has in a series of moves relaxed foreign exchange management norms, in the wake of a steady rise in the country’s forex reserves. The total forex reserve stood at $ 64.039 billion at the end of last month. The rupee is only partially convertible on the capital account.

Further, the RBI had, in September, allowed companies to borrow up to $ 50 million from global sources without government approval and allowed them to repay foreign loans ahead of schedule.

The RBI also allowed companies to remit redemption proceeds of non-convertible debentures or partly convertible debentures issued by them, without any prior approval from the central bank.

GoI stock auction

The price-based auction of two Government of India (GoI) stocks, aggregating Rs 7,000 crore, conducted by the RBI today received an overwhelming response.

The 10.18 per cent GoI stock 2026, of notified amount Rs 3,000 crore, received 166 competitive bids totalling Rs 5,822.50 crore and 11 non-competitive bids aggregating Rs 30.50 crore, the RBI said in a release. The cut-off price was Rs 129.80 and yield to maturity was 7.48 per cent, it added.

The apex bank accepted 49 competitive bids of Rs 2,969.50 crore and all the non-competitive bids.

For the 10.03 per cent GoI stock 2019, of the notified amount of Rs 4,000 crore, the RBI received 245 competitive bids of Rs 10,410.90 crore. It also got 14 non-competitive bids totalling Rs 29 crore, the apex bank said.

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