Indian banks have mobilised USD 20.72 billion under the Reserve Bank of India's (RBI) special foreign currency incentive window, introduced to strengthen the country's external financing position and support the rupee amid heightened global uncertainty.
According to data released by the RBI, Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits accounted for USD 17.41 billion of the total inflows as of 17 July. Overseas Foreign Currency Borrowings (OFCBs) contributed USD 1.97 billion, while External Commercial Borrowings (ECBs) added USD 1.34 billion under the special measures announced in June.
FCNR(B) Deposits Dominate Inflows
The special window, operational from 8 June to 30 September, allows banks to mobilise foreign currency resources through eligible deposits and overseas borrowings under relaxed regulatory norms. FCNR(B) deposits emerged as the dominant source of inflows, accounting for more than 84 per cent of the total funds raised.
The RBI introduced the scheme to bolster foreign exchange reserves, enhance foreign currency liquidity and strengthen India's external financing position at a time of elevated crude oil prices, geopolitical uncertainty and heightened volatility in global financial markets.
The latest inflows have exceeded initial market expectations, easing concerns over banks' ability to attract foreign currency deposits despite relatively higher interest rates in overseas markets.
Economists expect inflows to accelerate further before the window closes at the end of September, with several banks continuing to mobilise FCNR(B) deposits and overseas borrowings. Analysts believe the scheme could generate significantly higher foreign currency inflows if the current momentum is sustained.
The additional inflows are expected to strengthen India's foreign exchange reserves, improve external financing conditions and provide the RBI with greater flexibility to manage rupee volatility amid persistent global market uncertainty and rising energy prices. |
