India's external debt increases on FCNR(B) deposits

Banks had raised about $34 billion through the FCNR (B) from deposits from NRIs in September 2013, most of which are falling due this year

India’s external debt at the end of 2015-16 grew $10.6 billion or 2.2 per cent, year on year, to $485.6 billion. Primarily on account of a rise in non-resident Indian (NRI) deposits, Reserve Bank (RBI) data showed. “The rise in short-term debt (residual maturity) mainly reflects payments due on account of maturing of FCNR(B) deposits mobilised under the special swap scheme in 2013,” said RBI.

Banks had raised about $34 billion through FCNR(B) as deposits from NRIs in September 2013, most of which are due this year. RBI estimates the immediate hit to be around $20 billion, as some of the deposits were invested by borrowing money from the same bank.

However, the magnitude of increase was partly offset by a valuation gain of $5.9 billion from the dollar’s rise against the rupee and other major currencies, RBI said. “Excluding the valuation effect, the increase in external debt would have been higher by $16.4 billion at end-March 2016 over the level at end-March 2015,” it explained.

Commercial borrowing, accounting for 37.3 per cent of the total debt, continued to be the largest component. Followed by NRI deposits at 26.1 per cent. Short-term debt accounted for 16.5 per cent. The ratio of short-term debt to foreign exchange (forex) reserves declined to 23.1 per cent at end-March from 25 per cent a year before.

On a residual maturity basis, short-term debt constituted 42.6 per cent of total external debt at end-March, from 38.2 per cent a year before, and stood at 57.4 per cent of total forex reserves against 53.2 per cent at end-March 2015.

RBI says dollar-denominated debt accounted for 57.1 per cent of the total, followed by the rupee at 28.9 per cent. Special Drawing Rights at the International Monetary Fund constituted 5.8 per cent and the Japanese yen 4.4 per cent. Euro-denominated debt was 2.5 per cent of the total.