0 months ago
RBI Rules Out Early End to Forex Swap Schemes
The Reserve Bank of India, which is the central bank of India, helps the country's money stay strong.
It has special plans that encourage people and companies to bring foreign money into India.
These plans help the Indian rupee not lose too much value.
The RBI said it will not stop these plans early.
One plan, called FCNR(B), will end in September, while two others will keep going until December.
Indian banks have already collected a lot of foreign money through these plans.
Many investors are now sending money back into India.
Foreign companies are also investing more money in India this year.
The rupee has gotten a bit stronger recently, and the RBI says it will only step in to stop very big swings in its value.
RBI Governor Sanjay Malhotra said there is no proposal to prematurely close the concessional foreign exchange swap facility.
The FCNR(B) scheme ends in September, while the OFCB and ECB plans will continue until December.
Indian banks raised $36.73 billion through the FCNR(B) deposits scheme, with $40.82 billion received via the three swap schemes by July 31.
Foreign portfolio investment turned around with net inflows of $7.1 billion in June-July after net outflows in April-May.
Gross FDI inflows rose to $30.7 billion in April-June from $26.7 billion a year earlier, and the rupee strengthened from about 97 to over 95 against the dollar.
- Who
- Reserve Bank of India Governor Sanjay Malhotra
- What
- Announced there is no proposal to prematurely close the concessional foreign exchange swap schemes and expressed confidence in continued healthy foreign inflows
- Where
- India
- When
- Announced Wednesday; schemes launched June 8, with FCNR(B) ending in September and OFCB/ECB till December
- Why
- To attract foreign capital, support the currency, and bridge the balance of payments gap
Concern over weak rupee appreciation
RBI confidence in fundamentals and market-driven exchange rate
Rupee response to the schemes
Concern over weak rupee appreciation
Questioning why the schemes have not led to sufficient appreciation of the rupee.
RBI confidence in fundamentals and market-driven exchange rate
RBI says the rupee may be undervalued on real effective exchange rate terms, fundamentals are strong, and the currency may strengthen further as tensions and conflicts de-escalate.
Exchange rate management
Concern over weak rupee appreciation
Expectation of more visible intervention to boost rupee gains from strong inflows.
RBI confidence in fundamentals and market-driven exchange rate
RBI maintains the exchange rate will be determined by market forces, with intervention only to curb excessive volatility and speculative behavior.
Key facts
- Announcement
- No proposal to close the concessional forex swap facility prematurely
- FCNR(B) scheme end
- September
- OFCB and ECB schemes end
- December
- FCNR(B) deposits raised
- $36.73 billion
- Total forex via swap schemes (to July 31)
- $40.82 billion
- FPI net inflows June-July
- $7.1 billion
- Gross FDI inflows April-June
- $30.7 billion (up from $26.7 billion year ago)
- Rupee movement
- Strengthened from about 97 to over 95 over the past month
Quotes
Sanjay Malhotra, RBI Governor
Governor of the Reserve Bank of India
“"We will continue with our policy of it being determined by market forces, while curbing excessive volatility, checking speculative behaviour and preventing disorderly movements to ensure that it is not out of sync with fundamentals or disruptive of economic activity."”
financialexpress.com
“"Capital flow measures undertaken in June have supported inflows; as a result, the balance of payments is expected to register a healthy surplus this year."”
financialexpress.com
Sources
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