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A big and positive news has emerged on the stability front of the Indian economy and domestic currency. The special dollar-rupee (USD-INR) forex swap facility launched by the Reserve Bank of India (RBI) has set a new record in terms of forex inflows. According to the data released by the Central Bank, through this concessional swap window, the total amount in the country till August 21 72.85 Billion Dollar (USD 72.848 Billion) Foreign funds of Rs. 100,000 have been raised. The largest contribution to this historical inflow has been foreign currency deposits by non-resident Indians in non-resident banks i.e. FCNR(B) Deposits who alone 65.4 Billion Dollar (USD 65.397 Billion) Has gathered huge support.
FCNR(B) becomes the main gamechanger with 90% stake
The RBI had launched the special swap window for three key channels—FCNR(B) deposits, overseas commercial borrowings (ECBs) and overseas foreign currency borrowings (OFCBs)—on June 8 in the current year.
According to the latest data, of the total funds raised, approx. 90 per cent share only in FCNR(B) deposits Has come through. Among other channels, $4.86 billion has been raised through Overseas Borrowings (OFCBs) and $2.59 billion has been raised through ECBs. This mobilization accelerated between the end of July and the third week of August, with more than $28.6 billion of fresh FCNR capital flowing into India in just three weeks.
The record of the historical crisis of 2013 was also left behind.
This current foreign exchange mobilization has proved to be much larger than the famous swap scheme launched during the tenure of former Governor Raghuram Rajan during the ‘Taper Tantrum’ crisis of 2013. During 2013, India raised about $26 billion through FCNR and a total of $34 billion. In comparison, funds worth $72.85 billion have been attracted so far in the current swap window, which is more than double the previous record.
Government banks put all their strength: SBI and BOB’s aggressive target
The active participation of major public sector banks of the country has played an important role in the success of this scheme:
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State Bank of India (SBI): SBI, the country’s largest commercial bank, has already raised FCNR funds of about $6 billion and is working on a target of $10 billion.
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Bank of Baroda: Bank of Baroda has set a target of $4 to 5 billion through FCNR and overseas borrowings.
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Indian Bank: Indian Bank has also set an aggressive target of raising $2 billion under this window.
Banks offered attractive interest rates on dollar deposits with tenures of 3 to 5 years to attract non-resident Indians (NRIs), supported by a concessional swap rate by the RBI.
What will be the impact on the strength of rupee and foreign exchange reserves?
This fresh foreign exchange inflow of $72.85 billion will provide several strategic benefits to the Reserve Bank of India amid the volatility in global crude oil prices and pressure on the dollar index:
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Strengthening Forex Reserves: Heavy dollar inflows have pushed the country’s foreign exchange reserves to historic highs, bolstering import cover for several months.
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Break on rupee devaluation: The influx of foreign funds has balanced the demand for dollars in the open market, thereby providing strength and stability to the Indian currency (INR).
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Improvement in Domestic Banking Liquidity: When banks swap dollars with the RBI, the central bank releases an equal amount of Indian rupees into the system, thereby strengthening the liquidity position in the banking system ahead of the festive season.
Deadlines and deadlines ahead
Due to better than expected and overwhelming response, RBI has shortened the initial deadline for mobilizing FCNR(B) deposits. 31st August Has been limited to. However, the swap facility under External Commercial Borrowings (ECB) and Overseas Borrowings (OFCB) for Indian companies and financial institutions Will remain open till 31 December 2026. This step of RBI reflects the global credibility of the Indian financial system and the unwavering confidence of foreign investors.