RBI Eases Dollar Swap Rules for Banks
The Reserve Bank of India has given banks greater flexibility to swap dollars raised from non-resident Indian deposits, allowing large transactions outside their designated weekly window. The move comes ahead of the August 31 deadline for a special deposit scheme that has attracted more than $65 billion.
RBI Eases Dollar-Rupee Swap Rules for Banks
Banks can now access the RBI’s dollar-rupee swap facility more than once a week for Foreign Currency Non-Resident, or FCNR(B), deposit transactions exceeding $100 million.
Previously, each bank was assigned a specific day every week to carry out such swaps with the central bank.
Transactions below $100 million will continue to be restricted to the designated weekly window.
FCNR Deposit Scheme Draws Over $65 Billion
The relaxation comes as banks see strong inflows ahead of the August 31 closure of the subsidised FCNR(B) deposit scheme.
The programme has attracted more than $65 billion and forms part of the RBI’s broader effort to strengthen foreign-exchange buffers and support confidence in the rupee.
Banks have been raising overseas funds aggressively as they seek to offer attractive terms to non-resident depositors before the scheme ends.
RBI Move Aims to Ease Dollar Liquidity Pressure
Large inflows can leave banks holding excess dollars until their scheduled RBI swap day, forcing them to use the overnight swap market in the meantime.
That pressure became visible on Thursday when the one-day dollar-rupee swap cost surged to 2.5 paise, compared with around 0.40-0.50 paise in recent sessions.
The one-month annualised implied hedging cost also jumped by more than 30 basis points before easing after the RBI’s intervention.
Greater flexibility should allow banks to transfer surplus dollars to the central bank sooner, helping contain short-term liquidity disruptions and excessive hedging costs.
