Foreign Currency Non-Resident Bank, or FCNR (B), deposit inflows remain robust. While the FCNR(B) swap window closes on September 30, the RBI’s external commercial borrowing (ECB) and overseas foreign currency borrowing (OFCB) swap window allow borrowings to be drawn down until December 31.
“As of now, there is no proposal under consideration to close the scheme prematurely,” RBI governor Sanjay Malhotra said after the monetary policy announcement.
The comments came in response to concerns over the need to continue subsidising the swap facility given that unlike the 2013 FCNR(B) scheme-launched during the taper tantrum, when the US Federal Reserve slowed the quantitative easing, leading to a slide in the Indian rupee and foreign exchange reserves-the country’s external position is currently far stronger, with forex reserves of about $693 billion.
The RBI, however, indicated it is comfortable with keeping the window open until the announced deadline.
The facility, introduced on June 5 to boost dollar inflows and strengthen foreign exchange reserves, allows banks to swap eligible overseas borrowings with the central bank at concessional rates, significantly lowering their cost of funds.
Objectives Met: RBI governor Malhotra says strong inflows have ticked all the boxes
The concessional window had attracted around $60.5 billion of inflows by July 30. The mobilisation has already exceeded the roughly $26 billion raised during the 2013 FCNR(B) deposit scheme, making it one of the fastest foreign currency deposit drives in India’s banking history.
The RBI governor said the inflows have strengthened India’s balance of payments position.
Asked whether the inflows had met the RBI’s objectives on balance of payments, liquidity and reserve adequacy, Malhotra said, “Yes, as of now, it has ticked all the boxes.”
He said the central bank does not collect data on the geographical source of the deposits.
On a query whether public sector undertakings had sought an extension to the swap window for external commercial borrowings, the RBI governor said neither such a proposal is under examination, nor there is a need to extend the time frame given the robust flows.