With a view to further developing the corporate debt market, a Group was constituted with members from RBI, SEBI and other market participants. The Group is expected to submit its Report in January 2005.
(f) Market Stabilisation Scheme: Review
The ceiling on the outstanding obligation of the Government under the MSS has been raised from Rs.60,000 to Rs.80,000 crore with the threshold level for further review of the ceiling is placed at Rs.70,000 crore. Treasury Bills and dated securities worth Rs.54,146 crore were issued under the MSS up to October 21, 2004, out of which dated securities amounted to Rs.25,000 crore.
(g) Strengthening OMO Framework
The Fiscal Responsibility and Budget Management Act stipulates that effective from April 1, 2006, RBI’s participation in primary issues of government securities will stand withdrawn. Accordingly, a study Group will be constituted for strengthening OMO framework to address the emerging needs and equip RBI as well as the market participants appropriately.
Foreign Exchange Market
(a) Issue of Guarantee for Trade Credits: Liberalisation
In order to promote investment activity and to further liberalise the procedures relating to trade credits on imports, it is proposed:
• To accord general permission to ADs to issue guarantees/letters of comfort and letters of undertaking up to US $ 20 million per transaction for a period up to one year for import of all non-capital goods permissible under Foreign Trade Policy (except gold) and up to three years for import of capital goods, subject to prudential guidelines.
(b) Export Oriented Units: Relaxation of Time Limit for Export Realisation
In line with the announcement made in Government’s Foreign Trade Policy in September 2004, it is proposed that:
• 100 per cent EOUs and units set up under EHTPs, STPs and BTPs schemes would be permitted to repatriate the full value of export proceeds within a period of twelve months.
(c) Booking of Forward Contracts: Relaxation
In order to further liberalise the process of booking forward contracts, it is proposed:
• To increase the limit for outstanding forward contracts booked by importers/exporters, based on their past performance, from 50 per cent to 100 per cent of their eligible limit. However, the contracts booked in excess of 25 per cent of the eligible limits would be on deliverable basis.
(d) Forex Market Group
In order to review comprehensively the initiatives taken by RBI so far in the foreign exchange market and identify areas for further improvements, it is proposed to constitute an internal Group. The Group would consult with market participants and the TAC and submit its Report within three months.
(e) Survey on Impact of Trade Related Measures
In view of the substantial relaxation and simplification of procedures in the recent period, it is proposed to undertake a fresh survey for evaluation of the impact of the measures taken by RBI to reduce the transaction cost for exports.
Prudential Measures
(a) Migration to Basel II Norms: Next Steps
In view of the complexities involved in migrating to Basel II, a Steering Committee comprising members from banks, IBA and RBI has been constituted. On the basis of its inputs, RBI would prepare draft guidelines for implementation of Basel II norms and place them in the public domain.
Reconciliation between the financial and Cost Accounts
