India may see up to $50 billion forex inflows in FY27 under RBI's latest measures: Report
New Delhi, June 12
The Reserve Bank of India's latest measures to boost foreign currency inflows are expected to strengthen the country's forex reserves, improve banking system liquidity and support the rupee, with total inflows estimated at $40-50 billion in FY27, a report showed on Friday.
As per an analysis by Motilal Oswal Financial Services Ltd (MOFSL), banks could benefit from a reduction of around 200-250 basis points in borrowing costs through the ECB route under the RBI's concessional swap framework.
Lower funding costs are expected to support credit growth, strengthen lending activity and improve funding efficiency across the banking sector, it said.
The latest initiative resembles a similar RBI programme introduced in 2013, which had resulted in FCNR(B) deposit inflows of nearly $27 billion and overall NRI deposit inflows of around $34 billion.
In addition, that programme had contributed to strengthening India's foreign exchange reserves and improving stability in the currency market.
According to the report, FCNR(B) deposits currently account for only around 1.2 per cent of the banking system's total deposits, suggesting substantial room for expansion.
However, banks have already started raising FCNR(B) deposit rates across key maturities to improve the attractiveness of these products for non-resident Indian customers.
The brokerage said banks with stronger customer franchises and established overseas networks are likely to benefit the most and capture a larger share of expected inflows.
It further highlighted that the structure of the current framework creates advantages for both depositors and banks, encouraging greater participation.
According to the brokerage, stronger foreign currency inflows, improved liquidity and higher reserve buffers could support overall currency stability and strengthen investor confidence.
MOFSL has estimated that the rupee could strengthen towards the 93-94 range against the US dollar in the near term as inflows gather pace.
Additionally, FCNR(B)-linked funding provides banks with a spread advantage of around 60-65 basis points over traditional wholesale deposits because of exemptions from Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) requirements.
Notably, the central bank recently introduced special facilities for Foreign Currency Non-Resident [FCNR(B)] deposits and external commercial borrowings (ECBs), allowing banks to raise overseas funds at comparatively lower costs.
The measures are intended to attract foreign capital, improve resource mobilisation and enhance overall liquidity conditions in the banking system at a time when global market volatility and capital flow trends remain under focus.
— IANS
Reader Comments
Interesting move by the RBI. As someone who tracks emerging markets, a $40-50 billion inflow is significant. But I'm curious about how much of this will be actual new investment vs just circular flows or arbitrage. Also, the rupee at 93-94 seems optimistic given current global rate differentials.
Finally something positive for NRIs! FCNR(B) rates have been so low for years that nobody was bothering. If banks raise rates sensibly, many NRIs will bring money back home. I'm considering it myself. But hope the banks don't use the CRR/SLR exemption as an excuse to give poor rates after the initial hype.
Good steps by RBI but why do we always end up copying 2013 playbook? The global environment is very different now with higher US rates. ₹94 to a dollar won't happen easily. Also, these inflows are mostly just deposits, not productive FDI. Need real investments in manufacturing and infra.
As an expat considering an NRI deposit, this sounds promising. The 60-65 bps spread advantage for banks over wholesale deposits is attractive. But I'm cautious about exchange rate risk on maturity - if the rupee doesn't stay stable, my dollar returns could get wiped out. Anyone else thinking about this?
Great move! Lower borrowing costs for banks should eventually help bring down lending rates for home and business loans. 🇮🇳 Also, strong forex reserves make us less vulnerable to sudden capital outflows. But I hope the RBI keeps monitoring - last time there were some compliance issues with these deposit schemes.