In a bid to move toward full float of rupee, the Reserve Bank of India [Get Quote] on Tuesday announced a slew of measures such as doubling of resident individual remittances to $50,000 per year.

Announcing the half-yearly review of Monetary Policy, RBI said resident individuals are free to remit up to $50,000 per year for any current or capital account transaction or a combination of both, as against the earlier limit of $25,000.

Similarly, foreign exchange earner may retain up to 100 per cent of their earning in their Exchange Earners' Foreign Currency accounts.

Besides, companies eligible of accessing External Commercial Borrowings (ECBs) can avail of an additional amount of $250 million over and above the existing limit of $500 million per year.

In a move that would provide greater flexibility to the corporates in managing their liquidity and interest cost, RBI allowed prepayment of ECBs up to $300 million without prior approval. Earlier, the limit was $200 million.

The central bank also eased norms for corporates to set up offices abroad by increasing the limit of remittances for the purpose.

With a view to provide greater opportunity to mutual funds to invest overseas, RBI enhanced overseas investment limit to $3 billion as against $2 billion.

Similarly, the existing limit of $2 billion in government securities by foreign institutional investors (FIIs) has been enhanced to $3.2 billion.

RBI also allowed FIIs to rebook a part of forward contracts. It is proposed to allow FIIs to rebook a part, say 25 per cent of the canceled forward contracts, provided such contracts are supported by underlying exposure.

In order to provide the facility of hedging economic exposure, importers are allowed to book forward contracts for their custom duty component of imports.

Currently, customs authorities uses a fixed exchange rate for a month for the purpose of levying import duty.

Besides, forward contracts booked by exporters and importers in excess of 50 per cent of the eligible limit cannot be canceled.

Authorised dealer banks have been permitted to issue guarantees or letter of credit for import of services up to $100,000 for securing a direct contractual liability arising out of a contract between a resident and a non-resident.

RBI also eliminated the lock-in period for sale proceeds of the immovable property credited to NRO account, provided the amount being remitted to any financial year does not exceed $1 million.

"Foreign exchange earners may retain up to 100 per cent of their foreign exchange earnings in their Exchange Earners' Foreign Currency accounts.

"Authorised dealer banks may borrow funds from their overseas branches and correspondent banks (including borrowing for export credit, external commercial borrowings (ECBs) and overdrafts from their Head Office/Nostro account) up to a limit of 50 per cent of their unimpaired Tier I capital or $10 million, whichever is higher.

"Borrowers eligible for accessing ECBs can avail of an additional $250 million with average maturity of more than 10 years under the approval route.  Prepayment of ECB up to $300 million without prior approval of the Reserve Bank.

"Authorised dealer banks may allow remittances on behalf of their customers up to 15 per cent of the average annual sales/income or turnover during the last two financial years or up to 25 per cent of their net worth, whichever is higher, for initial expenses, and remittances up to 10 per cent of the average annual sales/income or turnover during the last two financial years for recurring expenses.

They may also permit remittances for acquisition of immovable property for the overseas office, within these limits.

"The existing limit of $2 billion on investments in government securities by foreign institutional investors to be enhanced in phases to $3.2 billion by March 31, 2007.

"The extant ceiling of overseas investment by mutual funds of $ 2 billion is enhanced to $3 billion. "Importers to be permitted to book forward contracts for their customs duty component of imports.

"FIIs to be allowed to rebook a part of the cancelled forward contracts.  Forward contracts booked by exporters and importers in excess of 50 per cent of the eligible limit to be on deliverable basis and cannot be cancelled."

Authorised dealer banks to be permitted to issue guarantees/letters of credit for import of services up to $100,000 for securing a direct contractual liability arising out of a contract between a resident and a non-resident.

Monetary and Credit Policy 2006-07: Complete Coverage