Banks have mobilised close to $32 billion under the Reserve Bank of India’s special foreign currency deposit and borrowing schemes, Governor Sanjay Malhotra said in an interview published on Monday. The schemes were announced in June and are aimed at strengthening India’s balance of payments and improving the country’s external resilience, he said.
Breakdown of the Inflows
Most of the $32 billion collected so far has come through the foreign currency non-resident deposit scheme, commonly known as FCNR(B) deposits, Malhotra said. Separately, about $7 billion has flowed in through foreign portfolio investment into debt securities, a trend he linked to recent changes in tax rules governing such investments.
Governor Addresses Rebooking Concerns
The governor also addressed concerns around how these inflows are being accounted for in the banking system. He said he has not seen evidence that a large share of the FCNR flows represent rebooking of existing deposits rather than fresh inflows. He added that an increase in government cash balances is partly responsible for the dollar inflows not showing up more visibly in rupee liquidity conditions.
Rupee “Not Overvalued,” Says Malhotra
On the currency itself, Malhotra said the rupee is “not overvalued” and could even be considered undervalued when measured on both a nominal and a real effective exchange rate basis.
SBI Research’s Independent Estimates
Independent estimates suggest the scheme’s final tally could run well ahead of the current figure. According to a report by SBI Research, RBI data showed banks had mobilised $20.72 billion under the special measures as of July 17, of which $17.41 billion came through FCNR(B) deposits. SBI Research’s own estimate placed the figure at more than $26 billion by the time of its report, with public sector banks and strong participation from non-resident Indians driving much of the momentum.
Projections Revised Sharply Higher
SBI Research has since revised its projection for total FCNR(B) mobilisation upward, to a range of $65-70 billion by the time the scheme concludes, compared with an earlier estimate of $40-45 billion. When overseas foreign currency borrowings and external commercial borrowings are included, the report estimated that overall inflows under the broader window could reach $80-85 billion. The report also anticipated that a significant share of FCNR(B) deposits maturing in August and September would be renewed under the current, higher interest-rate regime, adding further to the inflows.
A Playbook From 2013
This is not the first time the RBI has turned to FCNR(B) deposits and related swap windows to shore up dollar inflows during a period of rupee pressure. A similar scheme was launched in September 2013 under then-Governor Raghuram Rajan, when the rupee had fallen sharply against the dollar amid a widening current account deficit. That scheme, originally expected to raise about $10 billion, eventually brought in close to $30-34 billion over roughly three months before it closed at the end of November 2013, according to statements made by Rajan and other officials at the time.
Context of the Current Measures
The current round of measures comes as the RBI continues to manage the rupee’s trajectory amid global currency volatility and shifting capital flows. Malhotra’s comments were made in an interview with The Hindu BusinessLine, published Monday, and were subsequently reported by other financial news outlets.
What to Watch Next
The RBI has not yet published a detailed, itemised breakdown of the $32 billion figure beyond the broad split between FCNR(B) deposits and foreign portfolio investment in debt securities that Malhotra referenced. Analysts will likely watch for the central bank’s own weekly and monthly data releases in the coming weeks to corroborate the governor’s figures and to track how deposit renewals and fresh inflows evolve as the scheme progresses toward its stated deadline.
Sources
Deccan Chronicle: RBI Gov Says Special Forex Schemes Garnered $32 Billion So Far.
Business Recorder: Indian Banks Have Raised $32 Billion Under Dollar-Inflow Schemes, RBI Chief Tells The Hindu BusinessLine.
Business Today: The $70 Billion NRI Bet: Can FCNR(B) Deposits Buy India Enough Time to Defend the Rupee?
Business Standard: Raising FCNR Deposits Was Driven by FinMin: Rajan.
