India draws record $127 billion through forex deposits: RBI

India mobilised a record $127.23 billion through foreign-currency deposits under a special central bank programme aimed at strengthening the country’s foreign-exchange liquidity, highlighting the role of the overseas Indian community in supporting the economy during periods of market stress, the Reserve Bank of India said on Wednesday.Foreign Currency Non-Resident (Bank), or FCNR(B), deposits accounted for $127.226 billion in inflows as of August 31, the RBI said.Including overseas foreign-currency borrowings (OFCB) and external commercial borrowings (ECB), total inflows under the measures stood at $136.377 billion.The strong response prompted the RBI to close the FCNR(B) window a month ahead of schedule. The facility, launched on June 8, was originally scheduled to remain open until September 30 but was closed on August 31 after the central bank said its objective had been achieved ahead of schedule.FCNR(B) deposits are fixed-term deposits held in foreign currencies, with the principal and interest repaid in the same currency. This allows non-resident Indians to park foreign-currency funds with Indian banks without taking direct exposure to rupee exchange-rate fluctuations.The inflows give Indian banks and the RBI a larger pool of foreign currency to manage external pressures and support liquidity in the foreign-exchange market, particularly during periods of heightened rupee volatility.The RBI did not provide bank-wise mobilisation figures. However, private-sector lender ICICI Bank said separately that it had mobilised $17.88 billion through FCNR(B) deposits up to August 31.Loans provided by the bank’s international branches and subsidiaries against such deposits stood at $9 billion, while standby letters of credit issued to other banks against loans backed by the deposits amounted to $3.63 billion.The RBI measures included absorbing hedging costs for banks mobilising FCNR(B) deposits and allowing banks to lend against the funds. The initiative was aimed at strengthening India’s external-sector position and improving foreign-exchange liquidity amid global uncertainty.Overseas foreign-currency borrowings contributed another $5.26 billion, while external commercial borrowings brought in $3.891 billion, according to provisional RBI data.The latest mobilisation is reminiscent of India’s response to the 2013 “taper tantrum”, when the RBI introduced a special FCNR(B) swap scheme to attract foreign-currency deposits from overseas Indians as the rupee came under severe pressure following the US Federal Reserve’s plans to reduce its monetary stimulus.The 2013 scheme mobilised around $26 billion in nearly three months and was followed by a sharp recovery in the rupee. Foreign-currency assets received through the latest swaps will be reflected as foreign-currency assets on the RBI’s balance sheet, potentially adding to the country’s foreign-exchange reserves.India’s forex reserves rose by $12.422 billion to a record $729.328 billion in the week ended August 21, according to the latest RBI data.The finance ministry said last week that the large-scale mobilisation of long-term non-resident deposits and institutional funding would strengthen India’s external buffers while providing foreign-currency resources to banks and companies, news agency PTI reported.It also said the response reflected the continuing role of the Indian diaspora in supporting India’s financial and economic growth and confidence in the resilience of the Indian economy and banking system.The record inflows came as India’s economy showed resilience despite heightened global uncertainty. GDP grew 7.8% in the April-June quarter, beating expectations and the RBI’s 7% forecast for the period.Also read: RBI push: Forex reserves at all-time high of $729.3bn