MUMBAI: The Reserve Bank of India has said that under the forex swap windows opened from June 8 under three schemes of NRI deposits, ECBs and OFCBs, total inflows crossed USD 143.6 billion as of September 18. Of the total, as much as USD 132.98 billion came in through the higher-priced FCNR-B deposits, which were closed a month earlier on August 31.
When the NRI deposit window was closed on August 31, the RBI had said, the inflows provisionally stood at USD 127.23 billion.
Inflows through external commercial borrowings rose to USD 5.30 billion, while that of the overseas foreign currency borrowings rose to USD 5.32 billion, taking the total to USD 143.59 billion, more than eight times the same facility attracted in 2013. Both these windows will remain open till December 31.
The central bank announced these measures as the rupee came under too much pressure and was within spitting distance from plumbing the 97 level. However, despite the massive inflows, the rupee has not gained much as it has been trading close to 96 levels.
The other reason for these measures was the fast-depleting forex reserves, which are the best defence against external pressure on the economy by way of a negative balance of payments, which has been in the red in the past two fiscal years and continues to remain so far this fiscal and the widening trade deficit led to a current account deficit as oil prices soared after the Iran war began in March and also due to a massive spike in gold imports.
To sweeten the facility for banks as well as investors, the RBI said the money would be hedged by the central bank, which, according to many analysts, would cost it around USD 12 billion if most of the money is priced for five years.
Also, the RBI gave a free hand to banks in pricing them, which varied from 6.10 per cent to 6.8 per cent annually, as well as allowed banks to do leveraged lending, where the gear varied from a low of 9x by most banks to a high of 19x, as foreign banks like HSBC were offering.
The massive inflows also created a problem for the central bank to manage liquidity in the system, which had touched Rs 11.5 trillion as of September 11, forcing it to suck out money from the system through VRRR auctions and OMO purchases, among other tools.
Since August 2, the RBI has conducted dozens of VRRRs and has sucked out close to Rs 67 trillion from banks.