The most attractive feature of the scheme is the at-par swap arrangement, which provides banks with a concession of at least 280-300 basis points compared with the prevailing market swap cost.
The central bank said the dollar-rupee swap facility introduced for fresh mobilisation of FCNR-B deposits will remain open till October 16 this year.
FCNR-B deposits with three-to-five years’ tenure garnered between June 8 and September 30 will be eligible for the facility, the central bank said. Deposits renewed upon maturity can also be counted in the exercise.
Bank chiefs are expecting $35-40 billion in fresh inflows through the FCNR-B window following the RBI’s move to offer this facility and bear the entire hedging cost. The central bank had offered a similar facility in 2016, which resulted in an inflow of $26 billion.
To make the latest FCNR-B facility more lucrative, the RBI has exempted banks from maintaining the cash reserve ratio and statutory liquidity ratio against those deposits mobilised under the overall scheme of things.
The swap facility with the central bank will be available in US dollars, while the central bank said that for deposits mobilised in other permissible currencies, banks may arrive at the equivalent US dollar amount eligible to be swapped by converting the same at the prevailing market rates on the day of the swap deal.The tenure of the swap will be in line with the tenure of the deposits raised. Banks are, however, barred from issuing non-fund-based facilities to any entity assuring redemption or repayment of funds by any entity via deposits or bonds.
“Banks would be free to price these deposits as per their internal policy, but within the overall ceiling as per the guidelines,” RBI said.
Banks can avail of the swap facility only once in a week. During any week, banks can swap the maximum amount they raise in the preceding week in dollar terms.
In the first leg of the transaction, the bank will have to sell US dollars to the RBI at the financial benchmark reference rate. The settlement of the first leg of the swap
will take place on spot basis from the date of transaction while the second leg of the swap will take place at the same rate as the first leg. The swap will be undertaken at par, the central bank said.