RBI Dollar Swap: $72.8B Foreign Inflows Boost Forex Reserves
By ThePip Desk
India’s forex reserves surge by $72.8 billion via RBI’s dollar swap scheme, driven by FCNR(B) deposits, OFCBs, and ECBs. Significant boost to foreign currency inflows.
Indian banks have successfully mobilized $72.8 billion in foreign currency inflows through the Reserve Bank of India’s (RBI) special dollar swap facility as of August 21. This significant achievement reflects a rapid acceleration in fund mobilization over recent weeks.
Key Inflow Components
- Foreign Currency Non-Resident (Bank) (FCNR(B)) deposits: $65.4 billion
- Overseas Foreign Currency Borrowings (OFCBs): $4.9 billion
- External Commercial Borrowings (ECBs): $2.6 billion
The pace of foreign currency mobilization has notably intensified, nearly doubling the cumulative inflows from late July. Collections surged from $40.8 billion on July 31 to $56.9 billion by August 13, culminating in the $72.8 billion total by August 21. Banks added an impressive $32 billion in just three weeks.
This substantial influx has positively impacted India’s foreign exchange reserves. The country’s forex reserves saw an increase of nearly $10 billion in the week ending August 15. Bankers anticipate that India’s total forex reserves will surpass the all-time high of $728 billion by the end of August.
Scheme Adjustments Announced
Due to the encouraging response, the RBI decided to bring forward the closure of the FCNR(B) mobilization window. Only deposits mobilized up to August 31 will now qualify for the scheme, with corresponding swaps permitted until September 11. The ECB and OFCB components of the facility, however, will continue until December 31 as originally planned.
How the Dollar Swap Facility Works
The RBI’s dollar swap facility is designed to enable banks to raise foreign-currency funding efficiently. It effectively transfers much of the associated currency-risk management directly to the central bank. Fresh FCNR(B) deposits with a tenor of three to five years are eligible for a concessional USD-INR swap under this scheme.
- Concessional USD-INR swap: Available for eligible FCNR(B) deposits.
- Regulatory relief: Eligible deposits receive exemptions on Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) requirements.