PSBs target nearly $30 billion under RBI's concessional forex swap window

State-owned banks are targeting nearly $30 billion through foreign currency deposits and borrowings under the RBI's concessional swap window as inflows remain robust

India’s state-owned banks are targeting mobilisation of nearly $30 billion through FCNR(B) deposits, overseas foreign currency borrowings (OFCBs), and external commercial borrowing (ECB) under the Reserve Bank of India’s (RBI’s) concessional swap window, data compiled by Business Standard based on these banks’ post-earnings commentary showed.

 

Data shared by the government in Parliament showed that net inflows into FCNR(B) deposits stood at $28 billion as of July 30. Foreign banks mobilised $8.37 billion, private sector banks $10.73 billion, and public sector banks $8.84 billion. Among individual lenders, HSBC emerged as the largest mobiliser, with $6.14 billion, followed by SBI at $4.12 billion and ICICI Bank at $3.70 billion. Later, during a post-earnings press conference on Friday, SBI said it had mobilised $6 billion so far and was confident of total mobilisation of $10 billion by September.

 

“We have mobilised almost $6 billion FCNR (B) deposits so far, but the traction indicates that we should be able to mobilise around $10 billion,” C S Setty, SBI chairman, said at the post-earnings media briefing. SBI is helping non-resident Indian (NRI) customers leverage their FCNR(B) deposits, largely through its own branches, particularly its branch in GIFT City, Setty said. “We also have a standby letter of credit (SBLC) product, but it is not widely used at this point,” he said.

 

Overall inflows into the three schemes were $41 billion as of July 31, RBI data showed. Of this, $36.7 billion came through FCNR(B) deposits, $2.57 billion through OFCBs, and $1.5 billion through ECBs.

 

The robust mobilisation has prompted several analysts to raise their estimates for inflows under the scheme, with many now expecting the RBI’s concessional swap window to attract close to $80 billion. Japan’s MUFG Bank has sharply raised its estimate for inflows under the RBI’s forex measures to nearly $90 billion from $60 billion earlier. SBI Research had earlier estimated that FCNR(B) deposits could reach $65-70 billion by the close of the scheme on September 30, revising its previous estimate of $40-45 billion. Including ECB and OFCB inflows, total mobilisation could reach $80-85 billion, it said.

 

Bank of Baroda, the country’s second-largest state-owned lender, is targeting mobilisation of $4-5 billion under the RBI’s concessional swap window. Of this, nearly $3 billion is expected to come through FCNR(B) deposits, with the remainder likely to be raised through OFCBs and ECBs.

 

The other state-owned lenders are also targeting sizeable mobilisation under the RBI’s concessional swap window. Bank of India is targeting around $3.2 billion, while Punjab National Bank (PNB), the country’s third-largest state-owned lender, and Canara Bank are each looking to mobilise around $2.5 billion. Indian Bank is targeting around $2 billion, while Union Bank of India is looking to mobilise $1.5-2 billion.

 

RBI Governor Sanjay Malhotra stated that the central bank was not considering prematurely closing the concessional forex swap window and expected healthy inflows to continue after robust mobilisation in the first two months since the facility was operationalised.

 

In June, the RBI announced the concessional swap facility amid mounting pressure on the rupee from elevated crude oil prices, global risk aversion, and persistent dollar demand. The measures were aimed at strengthening India’s balance of payments and incentivising capital inflows.

 

Under the scheme, the RBI offers banks a concessional swap window for fresh FCNR(B) deposits, OFCBs, and ECBs. The facility for mobilising fresh FCNR(B) deposits is available until September 30, while the window for eligible OFCBs and ECBs remains open until December 31.