RBI imposed restriction on EEFC A/c holding

Indian Central Bank  ( RBI ) has  today imposed certain restriction on  EEFC account  being maintained by Indian Company with immediate effect  .

Objective of this step taken by RBI   

Ø  To bring more USD liquidity into the FX market ( looking into the INR depreciation )

Ø  To discourage  using of   EEFC A/c to keep  large USD balance  for long time with the objective of speculation by Big Exporters

What is the change about ?

Ø  All future Export proceeds received by Exporters :-  Only 50% will be allowed to be credited to EEFC a/c and balance 50% has to be compulsorily sold in the Market at the current rate .Untill now  100% Export proceed was allowed to be credited to EEFC A/c  .

Ø  Before buying any Foreign Currency from the Market the buying Company has to ensure and give declaration to the Bank  that all balance in EEFC account has been utilized . 

Ø  All existing Balance in EEFC a/c as on 10^th May 2012  :- 50% out of this balance has to be sold in the open Market in the next 15 days and Bank will report to RBI about this compliance

It is expected that appx US$3 Billion is likely to be sold by Exportesin the coming days but what  impact it will have to the Fx rate is too early to comment .