RBI sweetens NRI deposit nudge for banks
Mumbai: In a fresh incentive for banks to attract foreign currency deposits from overseas Indians, the Reserve Bank of India (RBI) on Friday exempted rupee loans against fresh and renewed foreign currency non-resident (FCNR-B) deposits of three to five years mobilized between 8 June and 30 September from their adjusted net bank credit (ANBC) calculations.
Adjusted net bank credit is net credit plus investments made by banks in certain bonds, and is used as a base for priority sector lending targets. This implies they are free to use these funds for loans without setting anything aside for the mandated priority sector targets.
Loans against non-resident external (NRE) term deposits, maintained in rupees by non-resident Indians (NRIs) earning in foreign currencies, of three years or more mobilized by the banks between 19 June and 30 September will also be exempt from the ANBC calculation, the central bank said.
Returns potential high
RBI said it has provided exemption from maintenance of cash reserve ratio (CRR) and statutory liquidity ratio (SLR) on fresh FCNR deposits of minimum tenor of three years and a maximum of five years, mobilized between 8 June and 30 September, and on fresh NRE term deposits.
The new FCNR accounts scheme allows NRIs to make leveraged and unlevered deposits at Indian banks in foreign currency, with RBI taking the hedging risk to offer the potential for high returns. The scheme, announced on 5 June and rolled out three days later, will run till the end of September.
HSBC, State Bank of India (SBI) and ICICI Bank garnered half of all inflows under the deposit incentive scheme to attract dollars and strengthen the rupee, official data showed.
No quick end
Despite strong inflows, RBI has no immediate plans to end the FCNR(B) scheme before the 30 September deadline, governor Sanjay Malhotra said on Wednesday.
“We have got robust flows as you have mentioned, and we do hope to get good healthy flows going forward. But as of now, there is no proposal under consideration to close the scheme prematurely. We will keep you posted on this,” Malhotra said at the post-policy press conference.
During the monetary policy announcement, he also said the country’s balance of payments (BoP) would see a healthy surplus in the current financial year.
India’s BoP surplus in FY27 is estimated at $40 billion, scaled up from the earlier estimate of $25 billion. The current account deficit (CAD) is estimated at 1.7% of GDP, according to a report by IDFC FIRST Bank dated 3 August.
