Collections under RBI's dollar swap scheme exceed $72.8 billion

Collections under the Reserve Bank of India's (RBI) dollar swap scheme have surpassed $72.8 billion as of August 21, marking a significant surge in foreign-currency inflows into Indian banking system. This milestone reflects the rapid acceleration in the mobilization of foreign capital through the special swap facility, which allows banks to access foreign currency funds while mitigating currency risk through RBI-backed swaps. The breakdown of the inflows shows that Foreign Currency Non-Resident (Bank) or FCNR(B) deposits account for the bulk of the total, contributing $65.4 billion. Overseas Foreign Currency Borrowings (OFCBs) add $4.9 billion, and External Commercial Borrowings (ECBs) contribute $2.6 billion. These figures highlight the diverse channels through which Indian banks are accessing foreign capital. The pace of mobilization has shown consistent growth, rising from $40.8 billion on July 31 to $56.9 billion on August 13, and finally reaching $72.8 billion on August 21. Over the past three weeks alone, banks have raised an additional $32 billion, bringing cumulative inflows to nearly 1.8 times the level recorded at the end of July. FCNR(B) deposits have also seen substantial growth, increasing from $36.7 billion on July 31 to $52.3 billion on August 13, and further to $65.4 billion by August 21. Weekly increases have continued to climb, with the latest addition of $13.1 billion following a prior jump of $15.6 billion. Major institutions such as HSBC, State Bank of India (SBI), ICICI Bank, and HDFC Bank have led the charge in mobilizing these funds, supported by active participation from other prominent private-sector lenders tapping into their Non-Resident Indian (NRI) networks. Public Sector Banks (PSBs), excluding SBI and a few others, have lagged behind in scaling up their efforts. Data from June 5 to July 30 reveals that HSBC was the largest incremental mobilizer, adding $6 billion, followed by SBI at $4 billion, ICICI Bank at $3.7 billion, HDFC Bank at $1.4 billion, and Kotak Mahindra Bank and Axis Bank each contributing $1.7 billion and $1.6 billion respectively. This trend underscores the varying levels of engagement among different types of financial institutions in leveraging the swap facility. The increased inflows have played a crucial role in bolstering India's foreign exchange reserves, which saw a near-$10 billion rise during the week ending August 15. Industry experts anticipate that reserves could surpass the all-time high of $728 billion by the end of August. The robust response to the facility has prompted the RBI to adjust its timeline for the closure of the FCNR(B) mobilization window. Initially set to close on September 30, the central bank has now shortened the period to allow deposits only up to August 31 to qualify. Corresponding swaps for FCNR(B) deposits can be executed with the RBI until September 11, while the ECB and OFCB components will remain open until December 31. The decision comes as a direct result of the encouraging response and the resulting influx of foreign capital. The facility enables banks to secure foreign currency funding while shifting much of the currency risk management burden to the RBI. Additionally, fresh FCNR(B) deposits with a tenure of three to five years are eligible for a concessional USD-INR swap, offering favorable terms to depositors. Eligible deposits also benefit from regulatory relief regarding Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) requirements, making the scheme more attractive for both banks and investors.