RBI’s new push could bring $70 billion in foreign inflows into India: Jefferies – Firstpost

The Reserve Bank of India’s latest measures to facilitate Foreign Currency Non-Resident Bank [FCNR(B)] deposits and External Commercial Borrowings (ECBs) could attract foreign currency inflows worth $50-70 billion, according to global brokerage Jefferies.

In its latest report, Jefferies said the revised framework offers more favourable conditions compared to the special swap window introduced in 2013 and could drive stronger participation from non-resident Indians (NRIs), banks, and overseas lenders.

The brokerage highlighted that supportive terms for FCNR-B deposits and ECB fundraising could make the scheme more attractive, particularly because of the ability to use leverage under the new framework.

“Terms on FCNR-B and ECB raising are supportive,” Jefferies said, adding that the latest measures provide a significant advantage over the previous programme.
According to the report, one of the biggest differences from the 2013 scheme is the cost of hedging. Jefferies noted that banks will not have to bear hedging costs this time as the RBI will absorb them, compared with a hedging cost of around 3.5 per cent in the earlier window.

FCNR(B) deposits allow non-resident Indians to keep deposits in foreign currencies with Indian banks, bringing foreign exchange inflows into the country. External Commercial Borrowings allow Indian companies to raise funds from overseas markets.

Jefferies said these changes could result in stronger inflows than the 2013 programme. During that period, India attracted significant foreign currency inflows through FCNR-B deposits and overseas borrowings.

The brokerage noted that the inflows generated through the earlier scheme were equivalent to around 12 per cent of India’s foreign exchange reserves and nearly 3 per cent of domestic deposits at the time.

The latest measures are expected to strengthen India’s external position by boosting foreign exchange availability and improving investor participation.