Private banks in India are escalating efforts to attract non-resident Indian foreign currency deposits as the RBI’s swap facility deadline accelerates, prompting rate hikes and rapid onboarding measures ahead of August 31 cut-off.
Private banks in India are racing to gather foreign currency deposits from non-resident Indians before the Reserve Bank of India’s swap window shuts on August 31, after the central bank unexpectedly brought forward the deadline from September-end.
Banks have responded by lifting interest rates, speeding up approvals and using website countdown clocks to push customers to act quickly, according to Business Standard and other banking disclosures. The window, which began on June 8, was designed to support stable dollar inflows by letting banks offer more attractive returns on fresh FCNR(B) deposits while lowering their currency-hedging costs.
Axis Bank, the country’s third-largest private lender, has raised its rate on FCNR(B) deposits above $1 million to 6.40% for three-to-five-year tenors from August 17. Federal Bank has also lifted its offering to 6.40% on certain dollar deposits. HDFC Bank and ICICI Bank are still quoting 6.25% on similar deposits, while State Bank of India is offering 6% on deposits above $1 million for five years, according to the banks’ published rates and Business Standard’s report.
The heightened competition is visible on lenders’ websites as well. HDFC Bank and ICICI Bank have added countdown timers for NRI customers, while some lenders are fast-tracking paperwork to ensure deposits are booked before the deadline. A senior private-sector banker told Business Standard that what would normally have happened in the second half of September is now being compressed into the second half of August.
ICICI Bank has also turned to the overseas bond market, raising $750 million through five-year dollar bonds, in a move that could help it support more FCNR(B) mobilisation. Other banks may follow suit if they decide they need additional dollar funding to sustain the push, the report said.
The RBI said last week that it was ending the concessional swap facility early because of an “encouraging response” and the resulting foreign exchange inflows. By August 13, banks had already mobilised more than $52 billion under the scheme, according to RBI data cited by Business Standard. SBI Research has estimated total mobilisation could reach $60 billion to $65 billion, while some market participants think the figure could rise to as much as $70 billion by the end of August.
Analysts at ANZ said the early closure suggests the central bank believes the programme has done much of its job, with reserves strengthened and short-term external financing pressure reduced. They added that extending the scheme further would probably have produced diminishing returns.
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