Daijiworld Media Network – Mumbai
Mumbai, Jul 21: The Reserve Bank of India's (RBI) measures to attract foreign currency inflows have mobilised $20.72 billion within weeks of their launch, strengthening confidence in India's balance of payments position despite rising global crude oil prices.
In its first update since the scheme was introduced in early June, the RBI said inflows of $20.72 billion had been mobilised up to July 17, with Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits accounting for around $17.5 billion of the total.
The figures exceeded market expectations and eased concerns that the scheme was witnessing a slow response due to elevated US interest rates and other global financial challenges.
Analysts at Nomura said the amount raised through the FCNR(B) deposit scheme was significantly higher than media estimates and contradicted the perception that banks were struggling to attract foreign currency deposits.
The current programme has also outperformed a similar RBI initiative launched in 2013. According to Bank of America (BofA), the earlier scheme mobilised about $10 billion during its first seven weeks, compared with more than $20 billion under the present programme over a similar period.
Economists noted that such schemes typically attract a larger share of deposits towards the later stages, indicating that inflows could accelerate further before the window closes.
Based on the mobilisation pattern observed in 2013, BofA estimated that India could attract nearly $80 billion under the current scheme if the existing trend continues.
The strong inflows have reinforced expectations that India's balance of payments (BoP) will remain in surplus during the current financial year despite heightened volatility in global oil prices.
Gaura Sen Gupta, Chief Economist at IDFC First Bank, said her current estimate points to a balance of payments surplus of around $25 billion, with the possibility of a higher surplus if FCNR(B) inflows continue to strengthen.
She noted that her forecast assumes Brent crude prices averaging $75–80 per barrel, while prices have recently climbed close to $90 per barrel.
According to Gupta, the additional foreign currency inflows provide the RBI with greater flexibility to manage depreciation pressures on the rupee through foreign exchange market interventions.
The stronger external position comes at a time when the rupee is once again trading near record lows against the US dollar.
According to a Reuters report citing a source familiar with discussions within the central bank, the current RBI leadership believes foreign exchange reserves should be conserved and views reserve adequacy more conservatively than headline reserve figures may indicate.
The robust response to the RBI's measures is expected to provide greater stability to India's external accounts and enhance the central bank's ability to manage currency market volatility in the coming months.