Special swaps rake in $143.5 billion in forex inflows: FCNR(B) scheme leads with $133 billion

Special non-resident bank deposits in foreign currencies surged to a record $143.5 billion in September, primarily driven by the FCNR(B) scheme, according to Reserve Bank of India data released on Monday. This marked a significant increase from the previous month's $127 billion. The total inflows, which encompassed external commercial borrowings (ECBs) and overseas foreign currency borrowings (OFCBs), surpassed five times the $26 billion raised under a similar scheme in 2013.

Banks were able to mobilize more funds in the final ten days of the scheme than they did in the initial 74 days, with $65.4 billion collected during that initial period. Gaura Sengupta, chief economist at IDFC First Bank, anticipates that the total inflows could reach $160 billion by the end of December, as the RBI continues to provide hedging facilities.

The FCNR(B) scheme, launched on June 8, aims to boost dollar inflows and bolster foreign exchange reserves by allowing eligible overseas borrowings to be swapped with the central bank at reduced rates. However, rising global bond yields have made borrowing via the ECB route less attractive, even with the RBI bearing the hedging costs. IDFC First Bank chief economist Madhavi Arora noted that with most of the inflows already received, there is no immediate need for the facility to continue.

While some experts suggest the RBI might curb banks and state-run firms from raising offshore capital via ECBs and OFCBs due to high global rates, the scheme is expected to persist until December 31.