Indian banks raise $20.7bn under RBI FCNR scheme
India's central bank incentive window has quickly attracted $20.7 billion, easing early fears of weak demand and bolstering dollar liquidity for the banking sector.
Indian banks have raised $20.7 billion in just six weeks under the Reserve Bank of India’s special incentive window, a pace that has rapidly dispelled early concerns the scheme was struggling for traction.
Foreign currency non-resident (FCNR(B)) deposits accounted for the bulk of the inflows at $17.4 billion. This was followed by $2 billion in overseas foreign currency borrowings (OFCBs) and $1.3 billion in external commercial borrowings (ECBs).
The swift mobilisation provides a crucial cushion of dollar liquidity for the Indian financial system. State Bank of India led the pack, raising $3 billion, while Bank of Baroda pulled in more than $400 million as of July 17.
Economists now expect the total figure to climb significantly higher. Gaura Sengupta, chief economist at IDFC First Bank, estimates an upside of roughly $10 billion based on the current trajectory.
"I believe net FCNR flows could ultimately clock around $60 billion, compared to earlier projection of $50 billion, with another $20 billion coming from ECBs and OFCBs," Sengupta said. "I am also optimistic because 60% of the inflows last time came in the final month."
Sengupta projected that total flows under the window could approach $80 billion. For context, a similar scheme launched in 2013 ultimately attracted $34 billion, helping to cushion the Indian economy during the taper tantrum.
The competitive dynamics driving the current inflows are notable. Foreign banks have emerged as standout players, with some offering leverage of up to 19 times to boost deposit mobilisation from non-resident Indians.
Market participants anticipate the momentum will accelerate in the coming weeks. Madhavi Arora, chief economist at Emkay Global, noted that bankers expect deposits under the FCNR(B) window to cross $26 billion by the end of July.
"We believe that by August-September, when the scheme gathers momentum and the market borrowing situation improves, the inflows will gain further traction," Arora said. She added that early numbers are encouraging, particularly as lenders increasingly target ultra-high-net-worth and high-net-worth segments.
