Indian Banks Raise $32 Billion Through Dollar-Inflow Schemes, Says RBI Chief
RBI Governor Sanjay Malhotra disclosed that Indian banks have mobilized $32 billion largely through FCNR(B) deposits and stated the central bank has adequate tools to manage liquidity.
Indian banks have raised $32 billion through special dollar-inflow schemes, a figure confirmed by Reserve Bank of India Governor Shaktikanta Das in an interview with Hindu Businessline. The fundraising comes as the central bank works to bolster foreign currency reserves and stabilize the rupee amid global financial volatility. These schemes are designed to encourage non-resident deposits and overseas borrowing by banks, providing a buffer against external shocks. The milestone underscores the banking sector's success in mobilizing foreign capital under the RBI's recent policy framework.
Reserve Bank of India Governor Sanjay Malhotra said Indian banks have mobilised nearly $32 billion through special dollar-inflow schemes, with the bulk of the funds raised via Foreign Currency Non-Resident (Bank) or FCNR(B) deposits (The Hindu). In an interview with The Hindu BusinessLine, Malhotra added that government securities have attracted more than $7 billion in foreign inflows since the policy measures were announced in June (The Hindu).
The Governor dismissed concerns that the inflows merely represent a recycling of existing deposits, stating that the central bank has adequate tools to manage any resulting liquidity (The Hindu). He said the measures have strengthened India’s external position amid heightened geopolitical uncertainty and volatile global capital flows (The Hindu).
Responding to questions about the RBI bearing the hedging cost of fresh FCNR(B) deposits and offering concessional foreign exchange swaps for external commercial borrowings by public sector entities, Malhotra said the arrangement poses no risk. “It is not something which should be a matter of concern because we have a foolproof system of insuring ourselves. So, whatever dollars we get, the excess foreign currency is invested in foreign assets. The risk, therefore, is not there,” he said (The Hindu).
On the rupee, Malhotra argued that recent depreciation does not reflect weakness in the country’s economic fundamentals. He attributed pressure on the currency to geopolitical tensions, dollar strength and broader volatility across emerging markets (The Hindu). “We do not target any specific exchange rate or band for the rupee. Our intervention, whenever necessary, is targeted to curb excessive volatility,” he said, adding that the currency is “not overvalued” and could even be considered undervalued in both nominal and real effective exchange rate terms (The Hindu).
Malhotra cited a current account surplus during April-May, robust services exports, resilient remittance inflows, rising merchandise exports and improving foreign direct investment flows as indicators of external sector strength (The Hindu). On reserve management, he said the RBI continues to be guided by the principles of safety, liquidity and returns, while reviewing reserve deployment periodically (The Hindu).
Turning to monetary policy, the Governor reiterated that inflation control remains the RBI’s foremost priority even as it remains mindful of growth risks. He said the Monetary Policy Committee will continue to adopt a data-dependent approach while navigating the evolving growth-inflation trade-off. “Our primary mandate is inflation and price stability. Therefore, we will do whatever is required first, to keep price stability and then, to see to what extent we can support growth,” he said (The Hindu).
Reuters India·The Hindu