The Reserve Bank of India’s (RBI) Foreign Currency Non-Resident Bank [FCNR(B)] deposit scheme has mobilised nearly USD 41 billion in inflows so far and is expected to attract USD 80-100 billion by the time it closes on September 30, according to a report by global brokerage Jefferies.
Introduced by the RBI on June 5, the scheme offers concessional swap facilities on fresh FCNR(B) deposits mobilised by banks from non-resident Indians (NRIs). The initiative aims to boost foreign currency inflows and support the rupee amid global market volatility.
Jefferies said the response to the scheme has exceeded expectations and is likely to strengthen India’s external position.
“There have so far been USD 41 billion of inflows through the scheme, and that is expected to double to USD 80-100 billion before the scheme ends,” the report said.
According to the brokerage, the strong inflows are expected to help stabilise the rupee, which had weakened earlier this year. The report noted that the rupee, which touched a low of 96.96 against the US dollar in May, was trading at 95.17 at the time of the assessment.
Jefferies also noted that this is the third time India has introduced an FCNR(B) mobilisation scheme to support the domestic currency, after similar initiatives in 1993 and 2013.
The report said many NRIs have actively participated in the scheme. It also cited market feedback suggesting that some investors have used leverage to enhance returns, although these observations were based on market intelligence rather than official data.
Apart from the FCNR(B) scheme, Jefferies highlighted another policy measure aimed at boosting foreign investment. It noted that the government exempted foreign investors from paying tax on interest income earned from Indian government bonds in early June.
Since then, net inflows into Indian government bonds have reached USD 8.7 billion, further strengthening India’s capital inflow outlook, the report said.
The brokerage also pointed to improving domestic economic indicators. Bank credit growth has accelerated to 17-18 per cent year-on-year, the highest level in more than a decade, led by 20 per cent growth in corporate lending. Lending to the agriculture sector has grown 17 per cent, while retail credit has expanded 16 per cent.
Demand for automobiles and residential property also remains healthy, indicating sustained momentum in domestic economic activity, the report added.
-ANI
