RBI Rushes Foreign Deposit Deadline

The Reserve Bank of India (RBI) has moved forward the deadline for mobilising foreign currency non-resident (bank) deposits, now requiring banks to do so by August 31, a month ahead of the original September 30 deadline. This decision was prompted by higher-than-anticipated foreign currency inflows.

As of August 13, the RBI had received $52.30 billion through FCNR(B) deposits. The central bank noted that the swap facility for these deposits, operational since June 8, has seen an encouraging response, leading to substantial foreign exchange inflows. The swap facility itself, which allows banks to hedge their borrowings at a zero-cost facility with the RBI, will be available until September 11, 2026, for these deposits.

In total, special measures by the RBI have attracted $56.84 billion in foreign inflows up to August 13, a notable increase from $40.81 billion reported at the end of July. FCNR(B) deposits accounted for the vast majority of these inflows, surpassing $26 billion mobilised under a similar scheme in 2013. Inflows from external commercial borrowings (ECBs) and overseas foreign currency borrowings (OFCBs) were more modest.

Meanwhile, the swap scheme for ECBs and OFCBs will continue as planned until December 31. This early closure of the FCNR(B) swap window for mobilisation contrasts with previous statements, though it reflects the current strength of India's foreign exchange reserves, which rose to $707 billion in the week ended August 7.