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The Reserve Bank of India has eased rules on overseas borrowing by Indian companies and relaxed rules on currency swap hedges by firms to help them cope with exchange rate volatility.

The central bank also raised the cap on interest rates banks can pay non-resident Indian depositors, in a bid to help stop the rupee's decline which plunged to a record low this week, making it Asia’s worst-performing currency.

According to a statement from the central bank, companies borrowing abroad can now pay as much as 3.5 percentage points over the London Interbank Offered Rate for loans longer than three years and up to five years, raising the cap by 50 basis points, or 0.5 percentage point.

For non-resident Indians, the spread over Libor was increased between 25 basis points and 100 basis points for two different deposit plans.

The central bank says it has kept the cap on rates for overseas loans of more than five years unchanged at 500 basis points over Libor. It also loosened rules for currency exchanges.

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