FM Sitharaman to review PSBs' foreign currency deposit mobilisation
New Delhi, July 10
Finance Minister Nirmala Sitharaman is scheduled to meet heads of public sector banks and financial institutions on Monday to review the progress of foreign currency deposit mobilisation and overseas borrowing initiatives aimed at strengthening external capital inflows, as per sources.
The meeting comes after the Reserve Bank of India (RBI) last month announced a series of measures to encourage banks to mobilise foreign currency deposits from Non-Resident Indians (NRIs), Overseas Citizens of India (OCIs) and Persons of Indian Origin (PIOs).
FM Sitharaman will review the mobilisation of Foreign Currency Non-Resident (Bank) or FCNR(B) deposits, overseas foreign currency bonds and external commercial borrowings (ECBs) by public sector banks and financial institutions, including IDBI Bank.
Until September 30, the central bank had withdrawn the interest rate ceiling on fresh FCNR(B) deposits with maturities of three to five years to help banks attract higher foreign currency deposits.
In addition, the RBI has introduced a concessional foreign exchange swap facility for FCNR(B) deposits of three to five years, reducing the cost of hedging foreign currency exposure for banks.
Moreover, the central bank announced a similar concessional forex swap facility to encourage public sector undertakings (PSUs) to raise funds through External Commercial Borrowings until September 30.
Following this, banks have registered a gradual increase in the flow of overseas funds and expect collections to accelerate further this month as awareness among NRIs is growing.
NDTV Profit reported that the industry has mobilised an estimated $3-4 billion through FCNR-B deposits as of July 3.
Bankers expect inflows to gather pace in the coming weeks, particularly from non-resident Indians based in the Gulf region, the report added.
Additionally, the revised scheme is expected to attract $40-50 billion in fresh FCNR-B deposits over time, according to bankers.
— IANS
Reader Comments
As an NRI in the US, I've been watching this closely. The interest rate ceiling removal should make FCNR deposits more attractive. But also the forex swap facility reducing hedging costs is huge - it directly affects returns. If the banks promote this properly, we might see billions flowing in. Good step amidst global headwinds.
Smart move! Instead of endlessly borrowing from abroad or burning reserves for rupee defense, tapping into the NRI diaspora's wealth is more sustainable. Gulf countries with millions of Indians working there should be the prime target. With these incentives, we could reduce external vulnerability. Hope banks don't get too bureaucratic in implementation.
It's good that the government is proactive, but I'm cautiously optimistic. The $40-50 billion target seems ambitious. We need to see if banks actually offer competitive rates vs other investment options. Also, why only till September 30? Extending this could give more confidence to NRIs. Still, better late than never to tap this resource.
As someone who manages family remittances, this is welcome. But here's my concern - while FCNR-B deposits are good, they can create hot money inflows if not managed well. The RBI should ensure these are long-term deposits, not short-term arbitrage plays. Otherwise, we might face sudden outflows when global rates change. Just a friendly suggestion for sustainability. 🤔
Living in Canada, I sent some money back recently. The process with PSBs is still cumbersome compared to private banks. If FM Sitharaman truly wants to mobilise funds, she should push for digital onboarding and simpler verification for
We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.