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RBI FCNR(B) swap window closes after $72.85 billion in inflows
The rupee weakened less than earlier after the FCNR(B) facility closed, but economists said the inflows did not directly tackle underlying dollar demand.
India’s FCNR(B) foreign currency non-resident bank deposit window, part of the RBI’s dollar-swap package announced in June, closed on Monday after attracting $72.85 billion in total inflows across three swap windows as of 21 August, with $65.4 billion routed through FCNR(B), $4.86 billion through OFCBs, and $2.59 billion through ECBs, according to LiveMint Markets.
The facility had been announced on 5 June and implemented from 8 June. It let banks raise new three- and five-year FCNR(B) deposits from non-resident Indians and swap the dollars with the RBI at a concessional rate aimed at effectively offsetting hedging costs, with the broader package also covering overseas foreign-currency borrowings and external commercial borrowings.
The RBI also moved up the FCNR(B) closure date to 31 August from 30 September, citing an “encouraging response,” while allowing swaps against eligible deposits to continue until 11 September.
Despite the scale of dollar mobilization, LiveMint Markets said the impact on the rupee was limited and uneven. The rupee was at 94.94 per US dollar on 5 June when the measures were announced, but by 31 August it was around 95.45, after having hit a record low of 96.97 on 15 May amid pressure from high crude oil prices, global bond yields, and foreign investor outflows, according to the report. ANZ economist Dhiraj Nim said the FCNR(B) inflows do not directly address underlying market demand for dollars.
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