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RBI allows banks to borrow capital overseas

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September 10
3:28 PM 2013

The Reserve Bank of India had allowed banks to borrow their capital overseas. RBI allowed domestic banks to borrow up to 100% and swap it at a subsidized rate. This was after RBI Governor Raghuram Rajan took over as head of India's central bank.

This was among the first few announcements made by Rajan to stabilize the movement of the Indian rupee, which rallied 7% to INR63.85 versus the US dollar. The movement of the country's currency was after the former International Monetary Fund chief economist assumed position in RBI.

RBI said that banks could borrow up to 100% of their Tier I capital at the close of the last quarter. This was 50% higher compared to the previous limit excluding borrowings for financing of export credit in capital instruments and foreign currency. RBI also said that the swap rates would remain open until November 30, 2013 and could be reset after a year.

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