RBI Reports India Attracts Record $127 Billion in Forex Deposits
India has achieved a record mobilization of $127.23 billion through foreign-currency deposits under a special Reserve Bank of India (RBI) program designed to enhance the country’s foreign-exchange liquidity. This initiative underscores the significant role of the overseas Indian community in bolstering the economy during challenging market conditions. As of August 31, Foreign Currency Non-Resident (Bank) deposits accounted for $127.226 billion of these inflows.
The RBI’s measures also included overseas foreign-currency borrowings (OFCB) and external commercial borrowings (ECB), bringing total inflows to $136.377 billion. The strong response from depositors led the RBI to close the FCNR(B) window a month early, achieving its objectives ahead of the scheduled September 30 deadline.
Details of the FCNR(B) Deposits
FCNR(B) deposits are fixed-term deposits held in foreign currencies, allowing non-resident Indians to invest without direct exposure to rupee fluctuations. The inflows provide Indian banks and the RBI with a larger pool of foreign currency, which is crucial for managing external pressures and supporting liquidity in the foreign-exchange market, especially during periods of rupee volatility.
While the RBI did not disclose bank-specific figures, ICICI Bank reported mobilizing $17.88 billion through FCNR(B) deposits by August 31. The bank’s international branches and subsidiaries provided loans against these deposits amounting to $9 billion, with standby letters of credit issued to other banks totaling $3.63 billion.
Impact on India’s Foreign-Exchange Reserves
The RBI’s initiative included absorbing hedging costs for banks and permitting them to lend against the mobilized funds. This strategy aims to strengthen India’s external-sector position amid global uncertainty. Additional contributions came from overseas foreign-currency borrowings, which added $5.26 billion, and external commercial borrowings, which brought in $3.891 billion.
This mobilization mirrors India’s response to the 2013 “taper tantrum,” when a similar FCNR(B) swap scheme attracted around $26 billion in three months, leading to a recovery in the rupee. The latest foreign-currency assets will be reflected on the RBI’s balance sheet, potentially boosting the country’s foreign-exchange reserves, which rose by $12.422 billion to a record $729.328 billion in the week ending August 21.
The finance ministry noted that the large-scale mobilization of long-term non-resident deposits would enhance India’s external buffers and provide foreign-currency resources to banks and companies. The response also reflects the ongoing support of the Indian diaspora for the country’s financial stability and economic growth.
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