RBI's latest move may bring $85B in forex inflows
What's the story
India is poised to witness a major surge in Foreign Currency Non-Resident (Bank) deposits, with projections of inflows between $65-70 billion by the end of the scheme. Overall, the country could see up to $80-85 billion in total deposits. The prediction comes from an SBI Research report, which highlights that public sector banks are at the forefront of this massive mobilization drive.
Record-breaking mobilization
Rapid mobilization outpacing previous record
The SBI Research report noted that the total amount mobilized in 45 days has already surpassed what was achieved in a three-month period back in 2013.
As of July 17, FCNR(B) deposits worth $17.41 billion had been mobilized, according to data from the Reserve Bank of India (RBI).
The total deposit inflows stood at $20.72 billion by this date, including $1.97 billion from Overseas Foreign Currency Borrowings (OFCBs) and $1.34 billion from External Commercial Borrowings (ECBs).
Updated projections
Revised FCNR forecast up to $65-70 billion
SBI Research has revised its total FCNR forecast for the end of the scheme to $65-70 billion, up from an earlier estimate of $40-45 billion.
The report also predicts that a large majority of existing FCNR deposits maturing in August and September will be renewed under the new scheme, driven by higher interest rates.
This renewal is expected to significantly boost FCNR(B) inflows.
Financial trends
Significant increase in FCA and deposit mobilization
The report also observed that Foreign Currency Assets (FCA) rose by $7.6 billion between June 8 and July 17.
Meanwhile, deposit mobilization for FCNR(B) flows stood at a whopping $17.4 billion, indicating a gradual exchange process at the RBI by banks accounting for nearly 44% of the total amount.
The next FCA reporting period is expected to show even higher inflows based on current trends.