RBI Swap Facility Draws $20.72 Billion
The Reserve Bank of India’s concessional foreign-exchange swap facilities attracted $20.72 billion in overseas inflows by July 17, strengthening the country’s external financial buffer as the rupee remained under pressure.
RBI swap facility attracts $20.72 billion
Banks mobilised approximately $17.41 billion through Foreign Currency Non-Resident Bank deposits under the RBI’s special swap window.
Another $1.97 billion entered through overseas foreign-currency borrowings by authorised lenders, while external commercial borrowings contributed $1.34 billion. The facilities became operational after the RBI announced a package of capital-inflow measures in June.
The FCNR(B) scheme covers fresh and renewed foreign-currency deposits raised between June 8 and September 30. Eligible deposits must have maturities ranging from three to five years.
How RBI forex swaps support banks
Under the arrangement, Indian banks raise foreign-currency deposits from non-resident Indians and swap the dollars with the RBI for rupees. The central bank later returns the dollars when the deposits mature.
By offering swaps at concessional rates, the RBI reduces the cost of protecting banks against exchange-rate fluctuations. Banks can consequently offer more competitive returns to overseas depositors without carrying the full currency risk.
Deposits may be mobilised in any freely convertible currency, although the swap transaction with the RBI is conducted in US dollars.
Rupee remains under oil pressure
The inflows provide additional foreign-exchange liquidity and support India’s balance of payments, but they have not eliminated pressure on the rupee.
The currency closed at 96.4450 against the dollar on Monday after briefly falling beyond 96.50, its weakest level in approximately two months. Rising crude oil prices and escalating Middle East tensions have increased demand for dollars from Indian energy importers.
India imports nearly 90% of its crude oil requirements, making the rupee sensitive to global energy prices. The RBI has also reportedly sold dollars through state-run banks to contain excessive currency volatility.
