Banks have informed Reserve Bank of India (RBI) Governor Sanjay Malhotra that they have mobilised over $9 billion under the ongoing special FCNR(B) deposit drive for non-resident Indians (NRIs). The scheme was launched in early June to shore up India's foreign exchange reserves and support the rupee, which had weakened sharply and touched a record low of 96.96 against the US dollar in May.
The RBI had announced a zero-cost foreign exchange swap facility for FCNR(B) deposits at its June 5 monetary policy meeting, allowing banks to offer more attractive returns to NRIs by absorbing the hedging cost. The facility is open until September 30. Analysts estimate the scheme could eventually attract $30-50 billion in deposits.
As part of the government's efforts to maximise inflows, RBI Governor Malhotra met the heads of public and private sector banks in Mumbai on Tuesday to review progress under the special deposit mobilisation drive. During the meeting, bankers also discussed operational issues related to the scheme.
The governor's meeting came a day after Finance Minister Nirmala Sitharaman asked public sector bank chiefs to intensify outreach to the Indian diaspora to boost foreign currency deposits.
"We informed the governor that the banking system has mobilised over $9 billion through the special FCNR(B) deposit drive so far," a public sector banker told The New Indian Express.
The scheme is aimed at strengthening India's foreign exchange reserves, which had fallen to around $670 billion in May before recovering to about $690 billion. The rupee, which had touched a record low in May, closed at 96.24 against the dollar on Tuesday.
However, some bankers expressed concerns about the scheme's attractiveness going forward amid changing global financial conditions.
"We also discussed the impact of the recent 50-basis-point increase in global interest rates, which has reduced the competitiveness of the dollar-rupee swap incentive package," a private sector banker said.
The concerns come amid renewed volatility in global markets following heightened geopolitical tensions in West Asia, which have pushed up crude oil prices and global bond yields, potentially affecting the relative appeal of FCNR(B) deposits.