Banks had raised $25 billion through FCNR deposits and another $9 billion through foreign currency borrowings and swapped the same with RBI. About $26 billion will be due in tranches between September and November.
The Reserve Bank of India (RBI) estimates that outflows from the maturing of the FCNR (B) in November would be about $20 billion and is set to provide liquidity, comforting both the markets and banks which were worried about a possible volatility due to exodus of dollars when the deposits mature. These are three-year-old foreign currency deposits that banks had contracted under a special RBI scheme in 2013 when the central bank bought the swaps and discounted the deposits for the banks to bring in dollars to protect the rupee.
RBI governor Raghuram Rajan said in a press conference said, "On the liquidity, there have been two concerns. First on the maturing of FCNR(B) deposits, our sense is that the leveraged portions of those deposits will not be renewed. Therefore, there could possibly be outflows of the order of $20 billion. The RBI has covered those requirements in the forward markets, and will take some advance deliveries in the lead up to the maturation of the deposits. Of course, some counterparties are apprehensive that they will not be able to deliver easily on the dollars we are owed, and hence there may be some dollar shortage in the market.
This is something that we will monitor. We may supply dollars in case of extreme volatility, but no one should take this for granted. We are, however, committed to supply short-term rupee liquidity to the extent needed, to support our monetary stance."
Chanda Kochhar, MD and CEO, ICICI Bank said, "The reassurance that the RBI stands ready to mitigate any financial volatility resulting out of FCNR deposit maturities due later this year is very welcome."
Banks had raised $25 billion through FCNR deposits and another $9 billion through foreign currency borrowings and swapped the same with RBI. About $26 billion will be due in tranches between September and November.
The RBI has a formidable forex kitty of $360 billion which can also be sold in case there is a shortage of dollars. And if this could lead to rupee liquidity tightening then RBI, Rajan said, could supply short-term liquidity.
"As far as our ability to act, there should be no question. But we don't want to encourage complacency on the part of people who have sold us dollars assuming that we will come in if they can't provide the dollars to us and bail them out. That is not the intent at all," said Rajan.
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
 "Raghuram Rajan")
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}