RBI's USD-INR forex swap facility attracts inflows worth $73B
What's the story
The Reserve Bank of India's (RBI) special USD-INR forex swap facility has garnered $72.8 billion in foreign exchange inflows till August 21. The facility, which was launched on June 8, includes Foreign Currency Non-Resident (FCNR)(B) deposits, Overseas Foreign Currency Borrowings (OFCB), and External Commercial Borrowings (ECB). Out of the total amount mobilized so far, FCNR(B) deposits alone account for $65.4 billion.
Record inflow
Inflows surpass 2013 FCNR(B) swap scheme
The current inflow is much higher than the RBI's 2013 FCNR(B) swap scheme, which mobilized around $26 billion in about three months.
The overwhelming response has prompted the RBI to pre-pone the closure of the FCNR(B) window to August 31 from September 30.
Nomura noted that FCNR(B) deposits jumped by $13.1 billion in just one week till August 21, a sharp rise from previous fortnightly mobilization figures.
Future projections
Total inflows to reach $90-100B mark
Nomura expects total inflows to be close to $80 billion by the end of August.
The ECB and OFCB facilities will remain open till December 31, which could take total forex mobilization under swap facilities to $90-100 billion.
"Overall, inflows continue to surprise on the upside," Nomura said, adding that despite early closure of FCNR(B) swap window, total inflows are unlikely to fall short of previous estimates.
Diaspora trust
Strong response reflects faith in economy, banking system
The Indian government has said that the strong response to the RBI's forex swap facility shows the Indian diaspora's faith in both the banking system and economy. The large-scale mobilization of non-resident deposits and institutional funding has also strengthened India's external buffers.