RBI Allows Loans Against FX Deposits
The Reserve Bank of India has clarified that domestic banks can extend loans to non-residents against foreign currency deposits, including through their overseas branches, as part of efforts to attract more foreign exchange inflows.
RBI Allows Loans Against FX Deposits
The RBI said Indian banks may offer loans to non-residents against Foreign Currency Non-Resident Bank deposits mobilised under its concessional swap facility.
The clarification also allows banks to issue standby letters of credit against such deposits. The move gives lenders more flexibility while structuring products for overseas Indian depositors.
The policy is aimed at making foreign currency deposits more attractive at a time when India is looking to strengthen dollar inflows and support external liquidity.
FCNR Deposit Scheme Gets Boost
Foreign Currency Non-Resident Bank deposits allow non-resident Indians to hold term deposits in foreign currency with Indian banks.
The RBI’s swap facility covers deposits with three-to-five-year maturities and is intended to reduce hedging costs for banks. With loans and credit support now permitted against these deposits, banks may be able to offer more competitive products to overseas customers.
Analysts expect the measure to improve participation in the deposit scheme and increase the foreign currency resources available to banks.
India Seeks Stronger Forex Inflows
The clarification is part of a broader set of steps announced by the central bank this month to attract foreign currency inflows.
The measures come at a time when global market volatility, higher import costs and pressure on the rupee have kept external-sector management in focus. Stronger FCNR inflows could help improve dollar liquidity, support reserves and give banks additional funding flexibility.
