MUMBAI/NEW DELHI: Bankers expect India to draw $80-85 billion of foreign capital through the RBI’s swap-backed push spanning FCNR(B) deposits, external commercial borrowings and overseas foreign currency bonds issued by banks, though the timing of inflows is likely to be uneven as durations differ.The early momentum is set to come from FCNR(B) deposits, which bankers said are already seeing traction among non-resident Indians, while public sector undertakings and banks are adopting a wait-and-watch approach on ECB and OFCB issuances given their longer windows.
The FCNR(B) facility closes on Sept 30, whereas ECB and OFCB schemes remain open until Dec 31, with bankers indicating that borrowing activity may gather pace in the Oct-Dec quarter.Large inflows can provide support to the rupee, which has been under pressure, amid the global turmoil.The push comes after a review meeting chaired by finance minister Nirmala Sitharaman with bank chiefs in the capital, where lenders reported strong interest across geographies including Singapore, Hong Kong, West Asia, the UK and the US. Banks are offering higher returns on FCNR(B) deposits, aided by the suspension of interest rate ceilings, and are stepping up outreach through digital channels to tap diaspora savings.A day after the FM meeting, RBI governor Sanjay Malhotra met bank chiefs to discuss deposit mobilisation plans among other issues. Malhotra suggested banks leverage advanced technologies, including AI, to expand their reach, improve operational efficiency, reduce costs and enhance customer experience, while ensuring robust cybersecurity, strong internal controls and safeguards against fraud and data misuse.Bankers, however, cautioned that conditions differ markedly from the 2013 swap window, when about $26 billion was mobilised via FCNR(B) deposits and a further $8 billion through overseas borrowings. The interest rate differential between India and the US has since narrowed, while changes in tax treatment in markets such as the UK have reduced the attractiveness of such instruments.This has increased the importance of tapping tax-efficient jurisdictions such as the UAE and encouraging NRI deposits funded through overseas borrowings.Another structural shift is the emergence of GIFT City as an international financial centre. While banks can raise and lend foreign currency through its units, lenders note that borrowing costs there may still exceed those in global markets, tempering its appeal.Officials said the RBI is supporting mobilisation through a real-time monitoring framework, while the finance minister urged banks to intensify engagement with NRIs and sustain the momentum. The schemes, announced in June, offer a dollar-rupee swap at par for FCNR(B) deposits and concessional swaps for ECBs and OFCBs, aimed at bolstering reserves and strengthening the balance of payments amid a more uncertain global backdrop.