FCNR(B) inflows could reach USD 50-60 billion as special deposit scheme gains pace: Economist
New Delhi, July 27
Foreign Currency Non-Resident Bank deposit inflows could reach USD 50-60 billion before the special window closes in September 2026, as the scheme gathers momentum after a slow start, Piramal Finance Chief Economist Debopam Chaudhuri said, expressing confidence that overseas deposits from non-resident Indians will pick up in the coming months.
"The FCNR(B) inflows were sluggish for the first couple of weeks, but as we understand it is picking up gradually. And this was the experience in 2013 also," Chaudhuri told ANI in an exclusive interview. "By the time this scheme gets over, my estimate is we should get inflows in the range of 50 to 60 billion dollars, if not more."
Ahead of the Reserve Bank of India's Monetary Policy Committee (MPC) meeting next week, both Chaudhuri and Devarsh Vakil, Head of Prime Research at HDFC Securities, said they do not expect the central bank to announce any fresh measures to boost FCNR(B) deposits.
Vakil said the slower-than-expected response was largely due to tax changes in key overseas markets. "There are some tax rules which have been changed in the overseas market, especially in the West Asia, Singapore, UK... and that's why we have seen that the response to these schemes from these regions are little lower than what market expected," he said, adding that the government and regulators are working with overseas authorities to address the issue.
Both economists also ruled out a rate cut at the August MPC meeting, saying higher inflation and elevated crude oil prices leave little room for monetary easing.
"I do not think there will be a rate cut," Vakil said. "In fact, we will see little more hawkish language from the RBI."
Chaudhuri shared a similar view, saying there was "no immediate reason" for either a rate cut or a rate hike at the upcoming meeting. "The rate cut window is over," he said, adding that he expects the RBI's next policy move to be "perhaps in the February meeting."
— ANI
Reader Comments
I remember the 2013 FCNR scheme worked well during taper tantrum. Hope this time also it helps shore up forex reserves. But why is response slow from Gulf countries? Those NRIs send most remittances. Tax issues need quick resolution.
Honestly, this is just another way to attract NRI money. But let's not forget that these deposits are expensive for banks - they have to pay higher interest rates. And if rupee depreciates, NRIs might chase better returns elsewhere. Still, short-term it's good for BoP.
No rate cut in August? That's disappointing for home loan borrowers like me 😔 But I understand inflation is high. February is too far away though! At least FCNR inflows will keep liquidity comfortable for now.
These economists love making big predictions. In 2013, FCNR inflows were about $26 billion. Now they say $50-60 billion? With global uncertainty and tax changes, I'm skeptical. But let's hope for the best - every dollar helps our external sector.
Interesting that both economists agree on no rate change. But I think RBI should use this opportunity to gradually ease liquidity while keeping rates steady. The FCNR scheme gives them breathing room to manage inflation without hurting growth. Smart monetary policy move, actually.
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