India gets $72.8 billion in dollar inflows under RBI swap facility

In the week ending August 21, India received a substantial $72.8 billion in dollar inflows, according to the Reserve Bank of India (RBI). The majority of these inflows, totaling $65.39 billion, originated from FCNR (B) deposits. The remaining funds, amounting to $4.86 billion from OFCBs and $2.59 billion from ECBs, were comparatively modest.

Banks contributed an additional $13 billion through the FCNR (B) window over the past week, surpassing the $52.30 billion received up until August 13. The RBI had recently shortened the deadline for banks to accept FCNR (B) deposits to August 31, reflecting the considerable inflows. However, the swap scheme for ECBs and OFCBs will persist until December 31, 2026, as initially scheduled.

This facility, initiated on June 8 to augment dollar inflows and bolster foreign exchange reserves, empowers banks to swap eligible overseas borrowings with the central bank at preferential rates, thereby reducing their borrowing costs. Banks can also engage in a zero-cost hedging facility for FCNR (B) until September 11.

Notably, inflows through the FCNR (B) scheme have surpassed the $26 billion amassed under a similar scheme in 2013, less than three months after the latest window opened on June 8. This scheme has significantly bolstered India's foreign exchange reserves, which surged by nearly $50 billion since July. The forex stockpile has surged for seven consecutive weeks, reaching a record high of $716.90 billion as of the week ending August 14, as per RBI data.