Analysts said strong fundraising by banks and demand for the scheme among overseas investors mean inflows could exceed earlier estimates. Jefferies India said in a note on Monday that it now expects FCNR inflows to reach $90 billion to $100 billion by the time the scheme closes on August 31, compared with its earlier estimate of $70 billion to $80 billion. The new estimate is also higher than the $80 billion that RBI governor Sanjay Malhotra estimated in an interview with a newspaper last week.
ET Bureau“Indian banks have mobilised US$16bn over 8 days (13-21 Aug) through FCNR-B and other schemes to a total of $73bn, exceeding our estimates. Given substantial debt issuance completed recently and in prospect, banks could cross our estimated range of raising $70-80bn, landing at $90-100bn by Aug 31,” Jefferies analyst Prakhar Sharma said in the note.
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Data released on Saturday showed FCNR (B) deposits accounted for a disproportionate share of the total dollar inflows, at $65.39 billion out of $72.80 billion.
Banks added another $13 billion through the FCNR (B) window over the past week, taking the total from $52.30 billion as of August 13, the latest RBI update showed.
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Higher inflows also mean the central bank will have to spend more to provide the swap facility, said Yes Bank chief economist Indranil Pan.
“Also, since it is a bullet repayment, the dollars will have to be delivered in one go, which will have costs. One estimate we did showed that for $65 billion of inflows, $88 billion of dollars will have to be provided including interest costs,” Pan said.
The impact on the rupee has also been limited, with the Indian currency broadly trading in the ₹95 to ₹96 per dollar range and showing no signs of a sharp rise.
“The impact on the rupee has been marginal because oil prices remain high. Unless oil comes down to $75 to $80 per barrel, the pressure on the rupee will continue. We are sticking with our estimate of rupee at ₹97 per dollar by the end of the fiscal year,” Pan said.
The Indian currency closed at Rs 95.74 per dollar on Monday. Brent crude was trading at around $93 per barrel on Monday.
Upasna Bhardwaj, chief economist at Kotak Mahindra Bank, said the bank had expected $70 billion of inflows from FCNR (B) deposits but now expects $75 billion to $80 billion because of the momentum.
“Perhaps the RBI expected strong inflows and curtailed the timeline,” she said, referring to the RBI advancing the deadline for banks to accept incentive-laden FCNR (B) deposits to August 31 by a month.