Margin deposit requirement against LCs withdrawn

The Central Bank has lifted the 100 percent margin deposit requirement against Letters of Credit for the importation of selected categories of motor vehicles from April 8, 2009, a Central Bank communique said. Such a margin was imposed on October 22, 2004 as a monetary policy measure in view of the expansion of money and credit aggregates, which caused pressure on the exchange rate and the balance of payments.

As a result of this and several other measures, the desired impact has already been achieved with reduced inflation and the deceleration of the monetary aggregates.

Accordingly, there is now no further need for such a policy in the framework for more relaxed monetary policy in the context of reduced inflation and more favourable inflation expectations outlook, the comminique said.