2 weeks ago
RBI Advances FCNR(B) Scheme Closure to August 31
The Reserve Bank of India is like the country's money keeper.
It started a special bank account plan to bring dollars into India.
Many people put money into this plan, about $52 billion so far.
The RBI decided to close this plan early, on August 31, instead of September 30.
It did this because it does not want to owe too many dollars later.
When the plan closes, India will have to pay back the money in a few years.
The rupee, India's money, became a little weaker after the news.
India's money savings, called reserves, grew to $707 billion.
This helps India be safer against money problems.
The Reserve Bank of India advanced the closure of the FCNR(B) deposit scheme to August 31 from the original September 30 deadline.
Banks have mobilised about $52 billion under the scheme so far.
Swap facilities for overseas foreign-currency borrowings and external commercial borrowings remain open until end-December, attracting about $4.5 billion.
The rupee weakened by about 17 paise against the dollar on Monday after the announcement.
India's foreign exchange reserves rose from about $680 billion in May to $707 billion on August 7.
- Who
- The Reserve Bank of India (RBI), led by Governor Sanjay Malhotra.
- What
- The RBI advanced the closure of the FCNR(B) deposit scheme to August 31, earlier than the original September 30 deadline.
- Where
- India.
- When
- Announced after August 5; the scheme now closes on August 31.
- Why
- To manage the external account, contain currency volatility, and avoid excessive future dollar repayment obligations.
RBI's prudent pause
Market and bank concerns
Timing of scheme closure
RBI's prudent pause
Closing early avoids accumulating excessive dollar liabilities that must be repaid in 3-5 years.
Market and bank concerns
Banks planned mobilisation efforts around the original September 30 deadline and markets were disappointed by the early closure.
Transparency of decision
RBI's prudent pause
The RBI reassessed the balance between immediate benefits and future risks as inflows accelerated.
Market and bank concerns
The RBI should explain the basis for the change more fully given banks' planning around the original deadline.
Key facts
- Scheme
- Special FCNR(B) deposit scheme
- Original deadline
- September 30
- New closure date
- August 31
- Funds mobilised
- About $52 billion
- OFCB/ECB swap inflows
- About $4.5 billion
- Forex reserves
- $707 billion as of August 7
- Rupee all-time low
- 96.90 per dollar in May
- Crude oil price
- About $88 per barrel
Sources
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