India sees dollar deposit deluge on FCNR(B) wave

Mumbai: The central bank's special measures to attract foreign exchange have brought in $40.81 billion by July 31, driven largely by foreign currency non-resident (bank) or FCNR(B) deposits, showed data released by the Reserve Bank of India (RBI).

FCNR(B) deposits accounted for $36.72 billion of the inflows, exceeding the $26 billion mobilised under a similar scheme in 2013, in less than two months after the latest window opened on June 8.

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Banks can swap these deposits with the RBI under a zero-cost hedging facility available until September 30. FCNR(B) inflows have jumped 77% from $20.72 billion reported as of July 17, the last data release.

By comparison, inflows under the swap facilities for external commercial borrowings (ECBs) and overseas foreign currency borrowings (OFCBs) have grown more modestly. ECB inflows rose to $1.51 billion from $1.34 billion, while OFCB inflows increased to $2.57 billion from $1.34 billion reported on July 17. Banks can raise funds through ECBs and OFCBs until the end of the year.

Last month, SBI Research said FCNR(B) deposits could reach $65-70 billion by the close of the scheme on September 30, revising its earlier estimate of $40-45 billion. Including ECB and OFCB inflows, the total is expected to reach $80-85 billion, it said.

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$60 billion Additional Capital Inflows
SBI Research said a large proportion of existing FCNR(B) deposits maturing in August and September 2026 is likely to be renewed under the new scheme, encouraged by higher interest rates, further boosting inflows.

In June, Goldman Sachs economists Arjun Varma and Santanu Sengupta estimated the RBI measures could generate an additional $60 billion in capital inflows, turning the balance of payments into a surplus of around 0.6% of GDP in the current financial year.

Nitin Aggarwal of Motilal Oswal Financial Services estimated the RBI's measures could generate an additional $40-50 billion in forex inflows in the year ending March 2027.