Timing and Sequencing of Measures for Capital Account Convertibility (Part 1 of 2) - આરબીઆઈ - Reserve Bank of India
Timing and Sequencing of Measures for Capital Account Convertibility (Part 1 of 2)
Chapter 4 |
4.1 |
The establishment of preconditions/signposts have been outlined in Chapter 3. The timing and sequencing of phasing out of capital controls assumes operational significance in the move towards CAC and these issues are addressed in this Chapter. |
|
Capital account convertibility is at present available for foreign direct investors under the extant FDI policy, portfolio investment for FIIs, NRIs and investment in non resident repatriable deposit schemes with banks in India. The international experience has shown that liberalisation of the capital account induces large capital inflows, which can cause a real appreciation of the exchange rate and erode the effectiveness of certain domestic macro economic policies. The Committee recommends that alongside further measures of liberalisation of capital inflows it is desirable to simultaneously liberalise controls on outflows as a means of contending with capital inflows. An early albeit cautious beginning to allow capital outflows is desirable as the system is attuned to a totally rigid ban on certain outflows and there is a need to develop confidence that some capital outflows, far from being destabilising, would be conducive to the overall efficiency of deployment of resources. Capital outflows, in the context of larger inflows, could relieve pressure on the exchange rate and the foreign exchange reserves and thereby enhance the effectiveness of domestic policies. |
||
The Committee recognises that while the timing and sequencing of CAC proposed in this chapter can be undertaken under the existing laws and regulations relating to foreign exchange, they would be facilitated by the proposed changes in the legislative framework governing foreign exchange transactions. In this regard, Shri. P. Chidambaram, the Union Finance Minister in his speech while presenting the Union Budget for 1997-98 said |
||
" As we progress towards a more open economy with greater trade and investment linkages with the rest of the world, the regulations governing foreign exchange transactions also needs to be modernised it is generally acknowledged that the Foreign Exchange Regulation Act, 1973 needs to be replaced by a new law consistent with full capital account, convertibility .........." [Part A - Paragraph 38] |
||
In this Chapter, the timing and sequencing of liberalising both inflows and outflows of capital are set out within the framework of a phased three year road map, classified in relation to various economic agents, viz., resident and non resident corporates, banks, non bank financial institutions and individuals. Concomitant measures for the development of financial markets to handle the enhanced mobility of capital flows are also set out. |
||
The banking system in India has been insulated from overseas markets for decades. Severe restrictions have been placed on banks borrowing funds from overseas or investing/lending abroad. Arbitraging between domestic and overseas markets have been strictly prohibited. The Committee recommends several measures for liberalising capital transfers by banks. Having regard to the fact that large scale short-term borrowings can be destabilising, the Committee recommends limits on such borrowings by the banking system. At the same time, a level playing field is to be ensured and the phased relaxation of controls should be concurrent with measures undertaken to ensure such a level playing field. In the area of foreign direct investment and portfolio investment, the Committee recommends complete elimination of the prior approval process from exchange control for investment/disinvestment. |
||
Having regard to the need to keep external debt within sustainable limits, the Committee has proposed continuance of the policy of ceilings on external commercial borrowings (except for loans with long maturities). The Committee recommends simplification of the procedure for investments overseas in joint ventures/subsidiaries and substantial increase in the value limit for such investments (without prior approval) which is expected to make Indian industry competitive. Moreover, the Committee recommends that the exacting repatriation stipulations for such investments should be totally removed. |
||
The Committee is of the view that a start should be made to liberalize outflows by individual residents. This will lend credibility to the commitment for CAC and give confidence to both residents and non residents that their genuine requirements for capital transactions are adequately met. |
||
The various measures for removing capital controls and the timings and sequencing thereof proposed by the Committee are tabulated in Chapter. The rationale for the measures is given in the paragraphs following the tabulated list of measures. |
Capital Account Convertibility- Timing and Sequencing of Measures |
($ indicates US dollars) |
|
|||||
Item |
Present Position |
Phase I |
Phase II |
Phase III |
|
1997-98 |
1998-99 |
1999-2000 |
|||
|
|||||
1. |
CORPORATES/BUSINESSES |
||||
A. |
Corporates/Businesses - Residents |
||||
1. |
Issuing foreign currency |
Not permitted |
To be permitted |
Same as |
Same as |
denominated bonds to residents |
without any ceiling |
Phase I |
Phase I |
||
(only rupee settlement) and |
. |
||||
investing in foreign currency |
|||||
denominated bonds and deposits |
|||||
(only rupee settlement). |
|||||
2. |
Financial capital transfers abroad |
Not permitted. |
$ 25,000 per annum. |
$ 50,000 per |
$ 100,000 per |
including for opening current/ |
annum. |
annum. |
|||
chequeable accounts. |
|||||
3. |
Accessing capital markets abroad through |
Permitted |
No approval to be |
Same as |
Same as |
GDRs & ADRs/ other forms of equity issues. |
individually by |
taken from RBI/ |
Phase I |
Phase I |
|
Government. Approval |
Government Reporting |
||||
under FERA given |
within 30 days from |
||||
by RB1. |
close of issue |
||||
4. |
External Commercial Borrowings(ECBs) |
ECBs are subject to |
Queuing for |
Same as |
Same as |
overall ceiling with |
purposes of |
Phase I |
Phase II |
||
sub-ceilings as indicated |
implementing |
except for |
|||
below: |
ceiling on ECB |
loans with |
|||
(i) Import linked |
while ensuring |
average |
|||
short-term loans (Buyers/ |
that relatively |
maturity of |
|||
Suppliers credit) for less |
smaller |
7 years and |
|||
than 3 years (i.e., 35 |
borrowers are |
above to be |
|||
months) approved by RBI |
not crowded |
outside |
|||
subject to sub- ceiling |
out by a few |
ceiling. |
|||
fixed by Government. |
very large |
||||
ii) Loans beyond 35 months |
borrowers. No |
||||
approved by Government. |
restrictions on end use |
||||
iii) US $ 3 million for a |
of funds. |
||||
minimum period of 3 |
|||||
years for business related |
Loans for |
||||
expenses including |
periods with average |
||||
financing rupee cost of |
maturity of 10 |
||||
the project - approved by |
years and above |
||||
RBI within sub-ceiling |
to be kept outside the |
||||
fixed by Government. |
ceiling. |
||||
iv) All other loans are |
|||||
approved by Government |
|||||
(generally for financing |
|||||
requirements of |
|||||
infrastructure projects, etc.). |
|||||
5. |
Foreign Currency Convertible |
Permitted |
To be within ECB |
Same as |
Same as |
Bonds/Floating Rate Notes |
individually by |
celling with same |
Phase 1 |
Phase I |
|
Government within |
procedure viz. |
||||
overall ECB ceiling. |
queuing vide item 4. |
||||
6. |
Loans from non residents |
Allowed by RBI on a |
To be allowed to |
To be allowed |
To be allowed |
case-by-case basis |
borrow up to $ |
borrow up to |
to borrow up to |
||
for loans from NRIs |
250,000 per entity |
$ 500,000 per |
$ 1 million per |
||
on non repatriable |
with payment of |
entity with |
entity with |
||
basis with |
interest not exceeding |
payment of |
payment of |
||
restrictions on |
LIBOR without |
interest not |
interest not |
||
interest payment and |
restriction on period |
exceeding |
exceeding |
||
end-use. |
of loan, use of funds |
LIBOR without |
LIBOR |
||
and repatriation of |
restriction on |
without |
|||
loan/interest. |
period of loan, |
restriction on |
|||
use of funds |
period of loan, |
||||
and |
use of funds |
||||
repatriation of |
and repatria- |
||||
loan/interest. |
tion of loan/ |
||||
interest. |
|||||
7. |
Joint ventures/wholly owned |
Proposals for |
Direct investments |
Same as |
Same as |
subsidiaries abroad |
investments up to |
abroad to be allowed |
Phase I |
Phase I |
|
$ 4 million are |
for ventures up to $ |
||||
cleared by the RBI. |
50 million by ADs |
||||
The extent of |
subject to transparent |
||||
outflow is dependent |
guidelines to be laid |
||||
upon the export |
down by the RBI. |
||||
performance of the |
Above $ 50 million |
||||
Indian promoter and |
through Special |
||||
capability for |
Committee. The |
||||
repatriation by way |
current stipulation on |
||||
of dividend, etc., |
repatriation of |
||||
within a period of |
earnings by way of |
||||
five years. Cases not |
dividend etc. within a |
||||
covered by these |
specified time period |
||||
criteria are cleared |
should be removed. |
||||
by a Special |
JVs/WOSs can be set |
||||
Committee. |
up by all parties and |
||||
Recently, an |
not restricted only to |
||||
announcement has |
exporters/exchange |
||||
been made in the |
earners. |
||||
Budget that balances |
|||||
in EEFC accounts |
|||||
can be used for |
|||||
investments upto |
|||||
$ 15 million without |
|||||
the specific approval |
|||||
of RBI. |
|||||
8. |
Project Exports |
Indian project |
Requirement of prior |
Same as |
Same |
exporters are |
approval by the RBI |
Phase I |
Phase I |
||
required to approach |
may be dispensed |
||||
the RBI for prior |
with subject, to |
||||
approval for variety |
reporting to the RBI. |
||||
of purposes while |
|||||
executing the |
|||||
projects abroad |
|||||
9. |
Establishment of offices abroad |
Powers given to ADs |
Any corporate entity |
Same as |
Same as |
to allow remittances |
may open offices |
Phase I |
Phase I |
||
for exporters with an |
abroad without the |
||||
average annual |
need for prior |
||||
export turnover of |
approval from RBI. |
||||
Rs. 150 lakhs and |
Capital expenditure |
||||
above to open |
towards opening of |
||||
representative/non- |
the offices and current |
||||
trading offices. |
expenditure for |
||||
Further, EEFC |
maintenance could be |
||||
account holders have |
subject to overall |
||||
been permitted to |
value limits to be |
||||
utilise their EEFC |
allowed by ADs. |
||||
balances without any |
|||||
restriction for |
|||||
establishing any type |
|||||
of offices. Other |
|||||
cases require RBI |
|||||
approval. |
|||||
10. |
EEFC accounts for exporters and |
50 per cent for EOUs |
100 per cent of |
Same as |
Same as |
exchange earners |
and 25 percent for |
earnings for all |
Phase I |
Phase I with |
|
others- restrictions |
exporters/exchange |
additional |
|||
on use of funds for |
earners to be allowed |
provision that |
|||
current account and |
to be held in EEFC |
EEFC ac counts |
|||
permitted capital |
accounts in India. Use |
can be |
|||
account transactions. |
of funds allowed for |
held with banks |
|||
current and permitted |
outside India at |
||||
capital account |
the option |
||||
transactions with |
of the exporter |
||||
cheque writing |
and the exchange |
||||
facility. |
earners. |
||||
B. |
Corporates - Non Residents |
||||
(including OCBs) |
|||||
1. |
Foreign Direct Investment (FDI) |
Currently OCBs are |
Prior approval |
Same as |
Same as |
allowed facilities similar to |
of RBI not |
Phase I |
Phase I |
||
NRIs. Other corporates are |
required for |
||||
allowed to invest up to |
FDI. Reporting |
||||
various proportions with |
by ADs to the |
||||
RBI/Government approval |
RBI. |
||||
under the FDI policy of the |
|||||
Government. |
|||||
2. |
Portfolio Investment in India through |
Allowed within the 24 per |
To be allowed to |
Same as |
Same as |
stock exchanges in shares/ |
cent limit (can be increased |
all non-residents |
Phase I |
Phase I |
|
debentures. |
to 30 per cent at the option |
without prior |
|||
of the company) which |
approval by |
||||
includes portfolio |
RBI. Designated |
||||
investment by NRIs, FIls & |
ADs should be |
||||
OCBs subject to approval |
required to |
||||
by the RBI which is valid |
report to the |
||||
for a period of five years. |
RBI. |
||||
The investment restricted to |
|||||
1 per cent by individual |
|||||
NRIs/OCBs and 10 per |
|||||
cent by individual FIIs. |
|||||
Corporates, other than |
|||||
OCBs and FIIs, are not |
|||||
permitted. |
|||||
3. |
Disinvestment |
Disinvestment as |
RBI approval to be |
Same as |
Same as |
approved by the RBI |
dispensed with. |
Phase I |
Phase I |
||
except where sales |
|||||
are made through |
|||||
stock exchange |
|||||
under portfolio |
|||||
investment scheme. |
|||||
II. |
BANKS |
||||
A. |
Banks - Residents |
||||
1. |
Loans and borrowings from overseas |
ADs are permitted to |
(i) Each bank may be |
Same as |
Same as |
banks and correspondents including |
borrow up to $ 10 |
allowed to borrow |
Phase I except |
Phase I except |
|
overdrafts in nostro account |
million from their |
from overseas |
that the ceiling |
that the ceiling |
|
overseas offices/ |
markets, short-term |
will be 75 per |
will be 100 per |
||
correspondents |
(up to one year) and |
cent of |
cent of |
||
without any |
long-term (over one |
unimpaired |
unimpaired |
||
conditions on end |
year), to the extent of |
Tier I capital |
Tier I capital |
||
use and repayment of |
50 per cent of the |
with a sub- |
with a sub- |
||
such borrowings. |
unimpaired Tier I |
limit of one |
limit of one |
||
capital with a sub |
third (i.e., 25 |
third (i.e., |
|||
limit of one third (i.e., |
per cent of |
33.33 per cent |
|||
16.67 per cent of |
unimpaired |
of unimpaired |
|||
unimpaired Tier I |
Tier I capital) |
Tier I capital) |
|||
capital) for short-term |
for short- term |
for short- term |
|||
borrowings. |
borrowings. |
borrowings. |
|||
(ii) No restrictions on |
|||||
use of funds and |
|||||
repayment. Prudential |
|||||
norms regarding open |
|||||
position and gap |
|||||
limits to continue. |
|||||
2. |
Investments in overseas markets |
Banks allowed to |
Investments may be in |
Same as |
Same as |
invest in overseas |
overseas money markets, |
Phase I |
Phase I |
||
money markets up |
mutual funds and |
||||
to $ 10 million. |
foreign securities. To be |
||||
allowed subject |
|||||
only to (i) requirements |
|||||
of Section 25 of BR Act |
|||||
1949* (ii) open |
|||||
position/gap limits. |
|||||
3. |
Fund based /non fund based facilities |
Cleared by RBI/ |
To be left to banks' |
Same as |
Same as |
to Indian joint ventures and wholly |
Special |
discretion - only |
Phase I |
Phase I |
|
owned subsidiaries abroad |
Committee. |
restriction to be Section |
|||
25 of BR Act. |
|||||
4. |
Buyers' credit/acceptance for |
Depending on |
To be allowed subject |
Same as |
Same as |
financing importer/their bankers for |
amount cleared by |
only to Section 25 of |
Phase I |
Phase I |
|
buying goods and services from India |
ADs/EXIM Bank/ |
BR Act. |
|||
(including financing of overseas |
Working Group. |
||||
projects) |
FERA approval |
||||
required from RBI. |
* |
Note : |
Section 25 of the Banking, Regulation Act, 1949 stipulates that the assets in India of every bank at the close of business on the last Friday of every quarter shall not be less than 75 per cent of its demand and time liabilities in India. |
5. |
Accept deposits and |
Not allowed other |
To be allowed without |
Same as |
Same as |
extend loans |
than under existing |
any ceilings - assets/ |
|||
denominated in foreign |
foreign currency |
liabilities mismatch to |
Phase I |
Phase I |
|
currencies |
deposit schemes. |
be taken into overall |
|||
from /to individuals |
open position /gap |
||||
(only rupee settlement) |
limits |
||||
6. |
Forfaiting |
Exim Bank alone has |
All ADs should be |
Same as |
Same as |
been permitted by |
permitted to |
Phase I |
Phase I |
||
RBI to do forfaiting |
undertake forfaiting. |
||||
B. |
Banks - Non Residents |
||||
1. |
Rupee Accounts of non resident |
Used only for |
Forward cover to be |
Same as |
Non resident |
banks |
merchant based |
allowed to the extent |
Phase I |
banks may be |
|
transactions - |
of balances. |
allowed to |
|||
investments not |
Cancelling/ |
freely open |
|||
allowed. Overdrafts |
rebooking to be |
rupee accounts |
|||
allowed upto Rs. |
allowed. The present |
with banks in |
|||
150 lakhs for normal |
overdraft limit could |
India without |
|||
business |
be increased and |
any restrictions |
|||
requirements for |
limited investments |
on their |
|||
temporary periods. |
may be allowed in |
operations. |
|||
rupee accounts |
|||||
III. |
NON BANKS - FINANCIAL |
||||
A. |
Non Banks - Financial - Residents |
||||
1. |
SEB I registered Indian |
Not allowed |
Overall ceiling of |
Overall ceiling |
Overall ceiling |
investors (including Mutual Funds) |
$ 500 million and the |
of $ 1 billion. |
of $ 2 billion. |
||
investments overseas |
ceiling should be so |
||||
operated that a few |
|||||
large funds do not |
|||||
pre-empt the overall |
|||||
amount. |
|||||
2. |
All India Financial Institutions |
Borrowings from |
(i) Borrowings more |
(i) Same as |
(i) Same as |
overseas markets or |
than one year to |
Phase I |
Phase I |
||
investments abroad |
continue within ECB |
||||
subject to RBI/ |
ceiling with |
||||
Government prior |
Government approval. |
||||
approval |
|||||
(ii) Short-term |
(ii) Short-term |
(ii) Short-term |
|||
borrowings to be |
borrowings to |
borrowings to |
|||
allowed subject to |
be allowed |
be allowed |
|||
limits. Investments in |
subject to |
subject to |
|||
short term |
limits. |
limits. Invest- |
|||
instruments to be |
Investments in |
ments in short |
|||
permitted within |
short term |
term instru- |
|||
limits up to the extent |
instruments to |
ments to be |
|||
of liabilities maturing |
be permitted |
permitted |
|||
within one month. |
within limits |
within limits |
|||
up to the extent of |
up to the extent |
||||
liabilities |
of liabilities |
||||
maturing within 3. |
maturing within 6 |
||||
months |
months. |
||||
B. |
Non Banks - Non Residents |
||||
1. |
FlIs |
||||
(a) |
Portfolio Investment |
(a) Investments in |
To be allowed without |
Same as |
Same as |
secondary market |
RBI prior approval. |
Phase I |
Phase I |
||
allowed once FII is |
Designated ADs |
||||
registered with |
would be required to |
||||
SEBI subject to 24 |
report to RBI |
||||
per cent ceiling |
|||||
(can be increased |
|||||
to 30 per cent at |
|||||
the option of the |
|||||
company) which |
|||||
includes portfolio |
|||||
investment by |
|||||
NRIs, FlIs and |
|||||
OCBs with a 10 |
|||||
per cent limit for |
|||||
individual FlIs and |
|||||
1 per cent by |
|||||
individual NRIs/ |
|||||
OCBs. FERA |
|||||
approval is given |
|||||
by RBI which is |
|||||
valid for a period |
|||||
of five years. |
|||||
(b) |
Primary market investment/private |
Primary market |
RBI approval not |
Same as |
Same as |
offering/private |
required. Designated |
Phase I |
Phase I |
||
placement |
ADs to report to the |
||||
placement allowed |
RB1. |
||||
with RBI approval |
|||||
up to 15 per cent of |
|||||
the new issue/ |
|||||
capital. |
|||||
(c) |
Disinvestment |
(i) Disinvestment |
RBI approval for |
Same as |
Same as |
through stock |
disinvestment to be |
Phase I |
Phase I |
||
exchange allowed |
dispensed with. |
||||
freely. |
|||||
(ii) Other routes of |
|||||
disinvestment |
|||||
require RBI approval |
|||||
(d) |
lnvestments in debt instruments |
Permitted to invest |
Maturity restrictions |
Same as |
Same as |
in dated Government |
on investments in |
Phase I |
Phase I |
||
securities of Central |
debt instruments |
||||
and State |
(including, treasury |
||||
Governments |
bills) to be removed. |
||||
(excluding Treasury |
FII investments in |
||||
Bills) both in |
rupee debt securities |
||||
primary and |
to be kept outside |
||||
secondary markets. |
ECB ceiling but |
||||
ECB ceiling |
could be part of a |
||||
includes FII |
separate ceiling |
||||
investment in rupee |
|||||
debt instruments. |
|||||
The Debt Funds of |
|||||
FIIs are also allowed |
|||||
to invest in corporate |
|||||
debt securities |
|||||
(NCDs, Bonds, etc.) |
|||||
listed or to be listed. |
|||||
FIIs can invest in |
|||||
equity and debt |
|||||
(NCDs, Bonds, etc.,) |
|||||
in the ratio of 70:30, |
|||||
Debt Funds of FIIs |
|||||
can invest upto 100 |
|||||
per cent in debt |
|||||
instruments subject |
|||||
to a ceiling, |
|||||
prescribed by SEB1. |
|||||
IV |
INDIVIDUALS |
||||
A |
Individuals -Residents |
||||
1. |
Foreign currency denominated |
Not permitted |
To be permitted |
Same as |
Same as |
deposits with banks/corporates in |
without ceiling |
Phase I |
Phase I |
||
India (only-rupee settlement) |
|||||
2. |
Financial capital transfers including |
Not permitted |
$ 25,000 per annum |
$ 50,000 per |
$ 100,000 per |
for opening current/chequeable |
annum |
annum |
|||
accounts |
|||||
3 |
Loans from non residents |
Residents are |
Residents to be |
Residents to be |
Residents to be |
allowed to obtain |
allowed to take loans |
allowed to take |
allowed to take |
||
interest free loans on |
from non residents up |
loans from non |
loans from non |
||
non repatriation |
to $ 250,000 per |
residents up to |
residents up to |
||
basis from non |
individual with |
$ 500,000 per |
$ 1 million per |
||
resident relatives for |
payment of interest |
individual with |
individual with |
||
personal and |
not exceeding |
payment of |
payment of |
||
business purposes |
LIBOR, without |
interest not |
interest not |
||
other than |
restrictions on period |
exceeding |
exceeding |
||
investment. Other |
of loan, repatriation |
LIBOR, |
LIBOR, |
||
cases need RBI |
of principal/interest |
without |
without |
||
approval. |
and use of funds. |
restrictions on |
restrictions on |
||
period of loan, |
period of loan, |
||||
repatriation of |
repatriation of |
||||
principal/ |
principal/ |
||||
interest and use |
interest and |
||||
of funds. |
use of funds. |
||||
B |
Individuals : Non Residents |
||||
1 |
Capital transfers from non |
Not allowed; |
$ 25,000 per year* |
$ 50,000 per |
$ 100,000 per |
repatriable assets held in India |
however, a few cases |
year* |
year* |
||
(including NRO and NRNR RD |
allowed on |
||||
accounts) |
sympathetic grounds. |
||||
2. |
Foreign Direct Investment in India |
(a) FDI for NRIs |
No RBI permission |
Same as |
Same as |
(FDI) (other than in real estate) |
with repatriation |
for FDI subject to |
Phase I |
Phase I |
|
benefits are to be |
reporting by ADs. |
||||
cleared by RBI/ |
|||||
Government under |
|||||
FDI policy. |
|||||
(b) FDI for other non |
|||||
resident individuals |
|||||
are to be cleared by |
|||||
Government and |
|||||
RBI. |
* |
No fresh NRNRRD accounts from 1997-98. On maturity the balances in the accounts get merged with other non repatriable funds or depositors can shift the maturity proceeds to a special 3 year NRE account with full repatriation benefit on maturity. If prematurely withdrawn from special NRE account, funds will get merged with other non repatriable funds of the non resident. In case of investments permitted on non repatriation basis on maturity or on disinvestment, the proceeds will be merged with other non repatriable assets. |
3. |
Portfolio Investment in India through |
Allowed to NRIs |
Allowed to all non |
Same as |
Same as |
stock exchanges. |
within the 24 per |
residents without RBI |
Phase I |
Phase I |
|
cent ceiling (can be |
prior approval. |
||||
increased to 30 per |
Designated ADs |
||||
cent at the option of |
would be required to |
||||
the company) which |
report to RBI. |
||||
includes portfolio |
|||||
investment by NRIs, |
|||||
FlIs and OCBs |
|||||
subject to approval |
|||||
by the Reserve Bank |
|||||
which is given for a |
|||||
period of five years. |
|||||
The investment |
|||||
restricted to 1 per |
|||||
cent by individual |
|||||
NRIs/OCBs and 10 |
|||||
per cent by |
|||||
individual FlIs. |
|||||
4. |
Disinvestment |
Disinvestment to be |
RBI approval to be |
Same as |
Same as |
approved by RBI |
dispensed with. |
Phase I |
Phase I |
||
except where sales |
|||||
are made through |
|||||
stock exchange |
|||||
under portfolio |
|||||
investment scheme. |
|||||
V. |
FINANCIAL MARKETS |
||||
1. |
Foreign Exchange Market |
||||
(a) |
Forward contracts |
Forward contracts |
To allow all |
Same as |
Same as |
are allowed to be |
participants in the |
Phase I |
Phase I. No |
||
booked on the basis |
spot market to |
restrictions on |
|||
of business |
participate in the |
participants in |
|||
projections in |
forward market; FlIs, |
spot/forward |
|||
respect of exporters |
non residents and non |
markets i.e., |
|||
and importers. Also |
resident banks having |
participation |
|||
forward cover |
rupee assets can be |
allowed |
|||
allowed for non |
allowed forward cover |
without any |
|||
residents for limited |
to the extent of their |
underlying |
|||
purposes such as |
assets in India. Banks |
exposure. |
|||
dividend remittance |
to be allowed to quote |
||||
and freight/passage |
two way in rupee to |
||||
collections. |
overseas banks/ |
||||
correspondents both |
|||||
spot and forward |
|||||
subject to their |
|||||
position/gap limits. |
|||||
Those with economic |
|||||
exposures to be |
|||||
allowed to participate |
|||||
in forward market. |
|||||
(b) |
Authorised dealers |
Authorised dealers at |
All India FIs which |
Same as |
To allow select |
present are only banks. |
comply with the |
Phase I |
NBFCs to act |
||
reaulatorv/prudential |
as full-fledged |
||||
requirements and |
authorised |
||||
fulfil well defined |
dealers on the |
||||
criteria should be |
basis of criteria |
||||
allowed to participate |
similar to FIs. |
||||
as full-fledged ADs in |
|||||
the forex market. |
|||||
(c) |
Products |
Currently the only |
All derivatives |
Direct access to |
Same as |
derivative in the |
including rupee based |
overseas |
Phase I & 11 |
||
rupee $ market is the |
derivatives to be |
markets by |
|||
forward contract. |
allowed. Futures in |
corporates for |
|||
ADs have been |
currencies and |
derivatives |
|||
allowed to enter into |
interest rates to be |
without routing |
|||
Rupee/$ currency |
introduced with the |
through ADs |
|||
swaps with |
system of screen- |
Phase I to |
|||
counterparties in |
based trading and an |
continue. |
|||
India subject to open |
efficient settlement |
||||
position and gap |
mechanism. |
||||
limits. Cross |
|||||
currency derivatives |
|||||
and interest rate |
|||||
derivatives allowed |
|||||
for covering |
|||||
underlying |
|||||
exposures - to be |
|||||
routed through ADs |
|||||
2. |
Money Market |
Banks allowed to |
Market segmentation |
Same as |
Same as |
lend and borrow |
to be removed. |
Phase I |
Phase I |
||
freely. FIs allowed to |
Deposit rates to be |
||||
lend with no limit/ |
deregulated and |
||||
allowed to borrow |
minimum period |
||||
within small limits. |
restrictions to be |
||||
Others allowed to |
removed. Restrictions |
||||
lend to primary |
on participants in the |
||||
dealers for minimum |
money market to be |
||||
amount of Rs. 10 |
freed. Level playing |
||||
crores. MFs |
field for all banks , FIs |
||||
participate only as |
and NBFCs regarding |
||||
lenders. Residual |
reserve requirements |
||||
restrictions on |
and prudential norms. |
||||
deposit rates |
|||||
applicable to public |
|||||
deposits; minimum |
|||||
period for CDs/ |
|||||
MMMFs/fixed |
|||||
deposits specified. |
|||||
3. |
Government Securities Market |
A number of |
(i) Access to FIIs in |
(i) The OPD to |
(i) The OPD to |
measures have been taken to |
Treasury bill market. |
take up part of |
take full |
||
strengthen the market for |
(ii) RBI to develop |
issue of dated |
responsibility for |
||
Government |
Treasury bill merket |
securities and all |
primary issues of |
||
securities such as a |
offering tow-way quotes. |
Treasury bills. (ii) |
all Treasury bills |
||
move towards market |
(iii) Government |
RBI to discontinue |
and dated |
||
related rates of |
Securities (including |
participation in |
securities. |
||
interest introduction |
Treasury bills) |
91 day Treasury |
(ii) Full |
||
of auctions and new |
futures to be introduced. |
bill primary |
underwriting of |
||
instruments and |
(iv) RBI to provide |
auctions and it |
issues by PDs with |
||
measures to develop |
Liquidity Adjustment |
should only |
RBI discontinuing |
||
the secondary market |
Facility to PDs |
participate in |
participation in |
||
through Primary |
through Repos and |
the secondary |
primary market |
||
Dealers (PDs) and |
Reverse Repos. |
market. (iii) |
for dated |
||
Satellite Dealers |
(v) Dedicated gilt funds |
Number of PDs |
securities. |
||
(SDs). |
to be given strong and |
and SDs to be |
|||
exclusive fiscal |
further increase |
||||
incentives to individuals |
with a quantum |
||||
to develop the retail |
jump in share of |
||||
segment. (vi) Number |
PDs in |
||||
of PDs and SDs to |
underwriting with |
||||
increase. Progressive |
strong incentives |
||||
increase in share of PDs |
through |
||||
in underwriting. |
underwriting |
||||
Commission to PDs to be |
commission. |
||||
related to PDs to be |
|||||
related to |
|||||
underwriting |
|||||
commitment (vii). |
|||||
Government to |
|||||
initiate action for setting |
|||||
up of an Office of Public |
|||||
Debt (OPD) (viii) |
|||||
Delivery Versus |
|||||
Payment (DVP) system |
|||||
to be fully automated for |
|||||
all securities on a real |
|||||
time basis with proper |
|||||
safeguards for ensuring |
|||||
that risks are controlled. |
|||||
4. |
Gold |
At present, there are |
(i) Banks and financial |
Steps to be |
Same as Phase |
restrictions on |
institutions fulfilling |
taken by |
I and 11 |
||
import of gold. There |
well- defined criteria |
Government |
|||
are only three |
to be allowed |
and the RBI for |
|||
channels through |
to operate freely both in |
developing, a |
|||
which import of gold is |
domestic and |
well regulated |
|||
allowed |
international markets. |
market in India |
|||
(1) through |
(ii) Sale of gold by |
for gold and |
|||
channels agencies |
banks and FIs |
gold derivatives |
|||
(ii) through returning |
included under |
including, |
|||
NRIs and (iii) |
(i) above to be |
forward |
|||
through special |
freely allowed to all |
trading. Both |
|||
import Iicences. |
residents. (iii) Banks to |
residents and |
|||
be allowed to offer gold |
non residents |
||||
denominated deposits |
to be allowed |
||||
and loans |
to operate in |
||||
(iv) Banks fulfilling |
this market. |
||||
well-defined |
|||||
criteria may be allowed |
|||||
to mobilise household |
|||||
gold and provide |
|||||
working capital gold |
|||||
loans to jewellery |
|||||
manufacturers as also |
|||||
traders. (v) Banks may |
|||||
be allowed to offer |
|||||
deposit schemes akin |
|||||
to GAPs (gold |
|||||
accumulation plans) |
|||||
5. |
Participation in |
Not allowed |
To be allowed |
Same as |
Same as |
international commodity |
Phase I |
Phase I |
|||
markets |