In a decisive step to check sliding rupee, the Reserve Bank today disallowed exporters from retaining half of their foreign exchange earnings, leading to a sharp recovery of Indian currency against dollar.
Thursday's move, which came after the rupee hit a record closing low of 53.82/83 to dollar yesterday, led to a 94 paise rise in the value of domestic currency in the early trade.
However, the local currency lost some of the gains after the forex market realised that RBI's decision would result in only up to $3 billion extra dollar supply in the market in initial stages.
In the intra-day trade, rupee had dipped below the 52-level, but pared some of the gains to close at Rs 53.42 against dollar.
Besides, the central bank has also fixed limit for intra-day trading of foreign currency by banks.
"On a review of the scheme, it has been decided that 50 per cent of the balances in the Exchange Earners' Foreign Currency Account (EEFC) accounts should be converted forthwith into rupee balances and credited to the rupee accounts as per the directions of the account holder," RBI said.
As per the existing rules, an exporter is allowed to retain 100 per cent of their earning into foreign currency.
EEFC is an account maintained in foreign currency with a bank. It is a facility provided to the foreign exchange earners, including exporters, to credit 100 per cent of their foreign exchange earnings to the account.
Concerned over sliding Rupee, the central bank has been taking steps in the past few days to increase the dollar supply in the market. These included-- increase of interest rates on NRI deposits and tightened norms for utilisation of the fixed deposit funds in a bid to check outflow of forex.