NEW DELHI — India has attracted USD 72.85 billion in foreign-currency inflows under a special Reserve Bank of India facility, with deposits from overseas Indians accounting for nearly 90 percent of the total.
Data released by the RBI showed that banks had mobilised USD 65.397 billion through Foreign Currency Non-Resident Bank, or FCNR(B), deposits as of August 21.
Overseas foreign currency borrowings contributed a further USD 4.86 billion, while external commercial borrowings accounted for USD 2.591 billion. Combined inflows through the three channels reached USD 72.848 billion.
The RBI introduced the special dollar-rupee swap facility in June to attract foreign currency, improve dollar liquidity in the domestic financial system and ease pressure on the Indian rupee.
FCNR(B) accounts allow non-resident Indians to hold term deposits in foreign currencies, shielding the deposits from fluctuations in the rupee’s exchange rate.
The latest figures indicate a strong response from India’s overseas population, with FCNR(B) deposits emerging as the dominant source of funds under the central bank’s programme.
RBI Governor Sanjay Malhotra said earlier this week that the measures were expected to attract at least USD 80 billion in foreign-currency inflows. With USD 72.85 billion already mobilised, the central bank is approaching that projection.
The RBI recently brought forward the closing date for the FCNR(B) swap window from September 30 to August 31.
Malhotra described the decision as a data-driven “calibration” rather than a reversal of policy. He said banks had been given sufficient time to make the necessary arrangements and argued that the marginal benefit of every additional dollar accepted through the facility was declining.
The facilities covering external commercial borrowings and overseas foreign currency borrowings will remain available until December 31.
Despite the scale of the inflows, the rupee has shown little movement from the levels recorded in early June, when the measures were announced.
The currency’s subdued response contrasts with developments in 2013, when a similar RBI programme helped attract about USD 34 billion and contributed to a sharp recovery in the rupee.
The current programme has already surpassed the 2013 mobilisation, with FCNR(B) deposits alone reaching more than twice the amount raised through that component during the earlier initiative.
The latest inflows have nevertheless strengthened the availability of foreign currency within India’s banking system and demonstrated the government’s ability to draw substantial dollar funding from overseas Indians and international markets. (Source: Rueters and Bloomberg)
