New Delhi — India’s banking system attracted $136.38 billion in foreign currency inflows through the Reserve Bank of India’s special dollar-rupee swap facility, with foreign currency non-resident deposits accounting for most of the total, according to provisional RBI data released Wednesday.
FCNR(B) deposits contributed $127.23 billion through Aug. 31, while overseas foreign currency borrowings accounted for $5.26 billion and external commercial borrowings added another $3.89 billion.
The RBI said the figures are provisional and remain subject to final reporting, accounting and reconciliation.
The strong response follows the central bank’s decision to introduce the special swap facility on June 8 to attract more foreign currency into the banking system and strengthen India’s external financial buffers.
Inflows accelerated sharply during August. As of Aug. 21, banks had mobilized $65.4 billion through FCNR(B) deposits, while combined inflows through FCNR(B) deposits, external commercial borrowings and overseas foreign currency borrowings stood at about $73 billion.
By the end of August, total mobilization had climbed to $136.38 billion.
Following the strong response, the RBI moved up the closing date for the FCNR(B) deposit mobilization window to Aug. 31 from the previously announced Sept. 30 deadline. However, the swap facility for eligible FCNR(B) deposits already raised will remain available through Sept. 11.
Facilities covering external commercial borrowings and overseas foreign currency borrowings will remain open until Dec. 31, 2026, giving banks and eligible borrowers additional time to access the program through those channels.
The sharp increase in longer-term FCNR(B) deposits suggests banks have been eager to tap overseas dollar funding. The RBI’s swap facility has helped lower the cost and currency risk associated with raising and managing such funds.
The inflows have also affected liquidity conditions in India’s banking system. System liquidity rose to 6.65 trillion rupees on Aug. 31, its highest level since May 2022, while the weighted average call rate fell to 4.98%, below the prevailing repo rate.
The scale of the latest mobilization is significantly larger than the response to the RBI’s previous FCNR(B) swap program in 2013, when banks raised about $26 billion through such deposits. (Source: IANS)
