Private Indian banks are boosting interest rates and expediting processes to attract foreign currency non-resident deposits before the Reserve Bank of India’s swap facility ends on August 31, amid heightened competition and strategic funding moves.
Private banks in India are racing to lock in foreign currency non-resident bank deposits before the Reserve Bank of India’s swap support ends on August 31, with lenders lifting interest rates, speeding up approvals and using website countdown clocks to push a sense of urgency on overseas customers.
The rush follows the central bank’s decision last week to shorten the concession period by a month, after what it described as an encouraging response and strong foreign exchange inflows. The swap facility, announced in June to draw in more stable dollar funding, had originally been open to deposits mobilised through September 30. According to the RBI’s earlier circular, the wider swap arrangement itself remains in place until October 16, but the key mobilisation window now ends at the close of August.
Axis Bank has been among the first large lenders to respond, lifting the rate on FCNR(B) deposits of more than $1 million to 6.40% for three- to five-year money, effective August 17. Federal Bank has also raised its rate to 6.40% from 6.25% for certain dollar deposits. HDFC Bank and ICICI Bank are still offering 6.25%, while State Bank of India is offering 6% on deposits of more than $1 million with a five-year tenor.
On their websites, HDFC Bank and ICICI Bank have added countdown timers showing non-resident customers exactly how much time is left to capture the higher rates. Bankers say the earlier close has compressed what would normally have been a late-September push into a much tighter August window, prompting faster processing and sharper competition for the same pool of funds.
ICICI Bank has also tapped the offshore bond market, raising $750 million through five-year dollar-denominated bonds, a move that may give it more room to support FCNR(B) mobilisation. Other lenders could follow with similar funding moves if they decide the lower hedging cost makes the strategy worthwhile. One senior private-sector banker told Business Standard that banks had not yet decided whether to lift rates further, but said the shortened window had clearly accelerated activity.
The scale of inflows so far suggests the scheme has already done much of the work the RBI wanted. The central bank’s latest data showed more than $52 billion had been mobilised by August 13. Analysts now expect the final figure could reach $60 billion to $70 billion by month-end, with SBI Research projecting $60 billion to $65 billion. ANZ economists Dhiraj Nim and Sanjay Mathur said the early closure indicates the RBI believes the programme has largely met its aim, with reserve buffers improved and near-term external funding risks reduced.
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