India has mobilised $65.397 billion through Foreign Currency Non-Resident (Bank), or FCNR(B), deposits as overseas Indians and banks respond to a special Reserve Bank of India (RBI) scheme aimed at drawing foreign currency into the country, according to the latest central bank data released on Saturday.
The figure, recorded as of August 21, accounts for the overwhelming majority of the $72.85 billion raised through three foreign-currency channels covered by the RBI’s special USD-INR swap facility. With the FCNR(B) window set to close on August 31, the latest numbers show a strong mobilisation of dollar deposits ahead of the deadline.
RBI data shows FCNR(B) deposits dominate foreign currency inflows
The RBI said authorised dealer banks had reported $65.397 billion in FCNR(B) inflows as of August 21.
Overseas foreign currency borrowings (OFCBs) contributed another $4.86 billion, while external commercial borrowings (ECBs) accounted for $2.591 billion.
Together, the three channels brought total foreign currency mobilisation under the facility to $72.85 billion.
FCNR(B) deposits therefore accounted for nearly 90 per cent of the total inflows, making them by far the largest contributor to the RBI’s foreign currency mobilisation programme.
The scale of the inflows is particularly significant given that the FCNR(B) component has only a short period remaining before its August 31 deadline.
Why RBI introduced the special USD-INR swap facility
The RBI introduced the special USD-INR forex swap facility in June to encourage foreign currency inflows through FCNR(B) deposits, ECBs and OFCBs.
The facility was designed to improve the availability of foreign exchange within India’s financial system at a time when the rupee was under pressure.
Under the arrangement, the FCNR(B) window will remain open until August 31, while the facilities covering ECBs and OFCBs will continue until December 31.
The latest RBI figures offer the clearest picture yet of how banks and overseas depositors have responded to the scheme.
RBI Governor expects $80 billion in foreign currency inflows
RBI Governor Sanjay Malhotra said earlier this week that he expects the central bank’s recent measures to attract at least $80 billion in foreign currency inflows.
His comments came shortly after the RBI brought forward the closure of the FCNR swap window by one month to August 31.
Malhotra defended the decision, describing it as a data-driven “calibration” rather than a reversal of policy.
The announcement may have appeared sudden, but the time given is sufficient for banks to make necessary arrangements, he said, adding there was a “diminishing marginal utility” of every dollar swapped.
With $72.85 billion already mobilised through the three channels as of August 21, the latest data put the RBI’s stated $80 billion target within reach.
FCNR(B) deposits emerge as the main source of dollar inflows
Of the $72.85 billion mobilised so far, $65.397 billion came through FCNR(B) deposits. By comparison, OFCBs and ECBs together contributed about $7.45 billion.
The strong response to FCNR(B) deposits comes ahead of the August 31 deadline, after which that component of the special facility will no longer be available.
The RBI’s data suggest that overseas deposit mobilisation has been the central driver of the foreign currency inflows generated under the programme.
Why the rupee has not responded sharply
Despite the scale of the foreign currency mobilisation, the rupee has shown only a limited response.
The currency has remained broadly around the levels seen on June 5, when the RBI announced its measures to encourage dollar inflows. That performance contrasts with the sharp appreciation recorded by the rupee in 2013, when the central bank introduced an overseas dollar window.
The latest data nevertheless show that the RBI’s foreign currency measures have generated a substantial response through the banking system.
With the FCNR(B) deadline approaching, banks have until August 31 to continue mobilising deposits through the facility, while the ECB and OFCB windows remain open until the end of December.
