While the banking system has received robust inflows into Foreign Currency Non-Resident (Bank) deposits so far under the RBI’s limited period concessional swap facility, the central bank is not considering any proposal to close the facility before the September 30 deadline, said Governor Sanjay Malhotra.
Public sector, private sector, foreign and small finance banks collectively mopped up $36.725 billion between June 8 and July 31, per RBI data. Malhotra expects healthy inflows into FCNR (B) deposits going forward. But the central bank does not have any target for the inflows.
The RBI is providing the concessional swap facility to encourage banks to mobilise FCNR (B) deposits of 3-5 years tenor. It has also exempted these deposits from statutory pre-emptions such as cash reserve ratio and statutory liquidity ratio. So, banks are quoting higher interest rates, in the 6-7.75 per cent range, on these deposits. Large banks are also offering leverage of 9-19 times of the deposit amount.
rupee appreciation
To a question on the rupee not appreciating despite robust inflows into FCNR (B) deposits, the Governor noted that India’s macroeconomic fundamentals remain very strong. Some analysts argue that the rupee may even be undervalued in nominal or real effective exchange rate terms.
