MUMBAI: Resident individuals will henceforth be free to remit up to $50,000 per financial year for any current or capital account transaction or a combination of both, as against the earlier limit of $25,000. The existing facilities for gifts, donations and investment by resident individuals in overseas companies would be subsumed under this revised limit.

Further, the existing facility for private travel up to $10,000 per financial year will continue to be available on a self declaration basis, the RBI stated in its Mid-term policy stance for the second half of 2006-07. These measures were announced as a follow-up of the recommendations of the Tarapore Committee on Fuller Capital Account Convertibility (FCAC). The RBI also stated that the lock-in period for sale proceeds of immovable property credited to Non-Resident Ordinary (NRO) accounts by Non-Resident Indians (NRIs) and Persons of Indian Origin (PIO) would be eliminated, provided the amount being remitted in any financial year does not exceed one million dollar.

All categories of foreign exchange earners will be allowed to retain up to 100 per cent of their foreign exchange earnings in their Exchange Earners' Foreign Currency (EEFC) accounts. The RBI also enhanced the ceiling of overseas investment by mutual funds of from $2 billion to $3 billion with a view to providing greater opportunity to mutual funds to invest overseas.

Authorised dealer banks will be permitted to issue guarantees and 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. Authorised dealer banks would be allowed to remit on behalf of their customers up to 15 per cent of the average annual sales or 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 upto 10 per cent of the average annual sales or income or turnover during the last two financial years for recurring expenses. It would also permit remittance for acquisition of immovable property for overseas office within these limits.

Authorised dealer banks would also be allowed to borrow funds from their overseas branches and correspondent banks (including borrowing for export credit), external commercial borrowing (ECBs) and overdrafts from their head office or nostro account) up to a limit of 50 per cent of their unimpaired Tier 1 capital or $10 million, whichever is higher. Borrowers eligible for accessing ECBs can avail themselves of an additional $250 million with average maturity of more than ten years under the approval route. Prepayment of ECBs up to $300 million without prior approval of the RBI will be allowed.

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

The RBI extended the intended date to adopt Basel II compliance from March 31, 2007 to March 31, 2008 for banks having presence outside India and foreign banks and March 31, 2009 for other scheduled commercial banks.

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