The finance ministry plans to relax the limits on foreign exchange inflows so that banks can more efficiently borrow foreign currency from overseas.

The ministry announced the decision Friday after an emergency meeting on macroeconomic and financial issues with the Financial Services Commission, the Bank of Korea and the Financial Supervisory Service.

The cap on foreign exchange forward positions for domestic banks will increase from the current 50 percent to 75 percent, while the limit for foreign banks will increase from the current 250 percent to 375 percent.

The ministry will also ease regulations on foreign currency loans converted into the South Korean won.
 
The looser foreign exchange rules come in response to a recent sharp decline in the local currency.

Previously, foreign exchange inflows were strictly limited for fear of causing the won to appreciate suddenly.