Swap window: RBI’s $34bn Re boost

 

 

 MUMBAI: The $34-billion (about Rs 2.1-lakh-crore) foreign assets that banks in India mobilized through the Foreign Currency Non-Resident (Bank), or FCNR(B), deposits from NRIs and banks' overseas borrowings partly helped strengthen the rupee from 69 to a dollar to the current level of above 62. And it is being hailed as a masterstroke by the RBI.

Bankers and economists alike say the move, that left each of the stakeholders — investors, banks and the government — a winner, was an option that also lifted the country's image as a good strategist. Now, moving ahead, the government needs to focus on the non-debt fund inflows for India that would enhance the stability of the financial system and the economy, they said.

"The FCNR(B) deposit move was done with no fanfare, no major announcement. Initially, the estimate was it would bring in about $7-8 billion, but the final count was more than four times the amount," said Abhay Aima, group head - equities & private banking group, NRI and international consumer business, HDFC Bank. "It mitigated the country brand risk, it's an off-balance sheet entry and also, unlike the country bonds that were an option, the foreign exchange risks are not on the government. In addition, the benefits of excess interest rate risks went to the customers (NRIs), the money came directly to the end-users (the banks)," he said.

 

jawed eqbal

pgdm-1sem