RBI's Early FCNR(B) Swap Window Closure Raises Rupee Risks

The Reserve Bank of India is like the country's money manager, and it watches over the Indian rupee.

It opened a special program called the FCNR(B) swap window to encourage banks to bring in foreign money.

The RBI decided to close this program earlier than planned.

A research group called SBI Research studied what this means.

It thinks banks could bring in about 70 billion dollars through these deposits.

Protecting that money from exchange-rate changes could cost about 10 and a half billion dollars over five years.

That sounds like a lot, but it is only a small part of India's big savings account, which holds nearly 700 billion dollars.

The rupee has barely moved, going up only 0.1%, since the program started in June.

SBI Research expects the rupee to get a bit stronger, reaching about 95 per dollar by the end of August.

There are also worries from far away, like high US bond yields and possible actions by Japan, that could put pressure on the rupee.