Banks Sourcing NRI Deposits may get Extended Swap Window for Hedging The Reserve Bank of India may extend the hedging swap window for banks that source NRI (non-resident Indian) deposits. Although $20 billion has already been raised through this mechanism, the central bank may choose to raise reserves buffer to quell renewed fears of taper in the market. “If RBI does not get $25-30 billion by November-end, it may consider extending the window for sometime,” said Partha Bhattacharya, deputy chief executive officer of Mecklai Financial. RBI governor Raghuram Rajan had on Wednesday said $18 billion had come in through FCNR (B) deposits by NRIs and the swap window. The measures were introduced on September 10. RBI’s swap facility is slated to end by November 30. The central bank allowed special swap window for FCNR (B) deposit to bridge the widening current account deficit. RBI opened a window to the banks to swap the fresh FCNR (B) dollar funds mobilised for a minimum three years at a fixed rate of 3.5% per annum. The rate is at least 3% lower than the three-year prevailing hedging cost. The cost is borne by RBI. Besides, the central bank had increased overseas borrowing limit of banks to 100% of Tier-I capital from 50% and the borrowings under this provision could be swapped with RBI at a concessional rate of 1% below the ongoing swap rate prevailing in the market.
Posted on: Fri, 15 Nov 2013 15:24:02 +0000
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