NRB eases foreign currency limits for BFIs on investments and payments

The central bank has introduced amendments to regulations governing foreign exchange through updates issued by its Foreign Exchange Management Department. Financial institutions now have greater flexibility to place funds into low-risk instruments outside the country, including sovereign bonds. Institutions can now direct up to an extra 10 percent of their overall investment limit into top-tier sovereign bonds from governments with an international credit rating of 'A-' or higher, according to the updated guidelines. Furthermore, regulatory provisions now enable financial entities to participate in hedging services. These financial tools assist in managing exchange rate risks linked to foreign currency credit lines or supplier financing used for importing capital goods. Sectors eligible to utilize these hedging facilities encompass information technology, commercial agriculture, manufacturing, infrastructure development, tourism, and energy. In addition to investment adjustments, modifications were applied to commercial service import payments originating from nations excluding India. Commercial banks are now authorized to extend exchange facilities reaching up to $30,000 per transaction, contingent upon regulatory approvals or recommendations. This new threshold represents a doubling of the previous limit, which stood at $15,000 per transaction.