The Reserve Bank of India (RBI) on Wednesday slapped new foreign exchange controls restricting the amount of dollars Indian companies and individuals can spend overseas, banned people from buying property in foreign countries and imposed fresh curbs on gold imports as part of a strategy to shore up the rupee.
The central bank also eased norms aimed at offering more attractive returns on NRI deposits in Indian banks.
Under new rules, an individual can spend $75,000 (about Rs 46 lakh) from the earlier $ 200,000 (about Rs 1.22 crore) in any given year. Companies can now invest only up to 100% of their networth in overseas locations, a fourth of the current level of 400% — a move that could affect firms’ plans to acquire overseas assets.
Finance minister P Chidambaram told CNBC-TV 18 the measures were not “capital controls” and companies can approach the RBI for approval of investments abroad beyond the cap.
“While the authorities aim to reduce foreign exchange volatility, we fear they may end up sending a panic signal,” said Sonal Varma, economist at broking and research firm Nomura.
The RBI also banned the import of gold coins and medallions, and importers of gold will have to pay upfront before getting any of the yellow metal with the condition that at least 20% of the gold imported will have to be re-exported.