Bankers expect RBI to extend special swap windows to bring in foreign currency deposits

Written by fe Bureau | Mumbai | Updated: Nov 16 2013, 10:23am hrs
Bankers are not ruling out an extension of RBIs special swap windows intended to attract foreign currency deposits beyond November 30 the stated deadline for the swap facilities.

Banks have raised nearly $18 billion under the swap facilities for foreign currency non-resident (FCNR) deposits and overseas bank borrowings, since they were announced in September.

Maybe, it could be extended by another 15 days or a month; it will depend on RBIs understanding whether they have enough foreign exchange, said Arundhati Bhattacharya, chairperson, State Bank of India. The central bank, however, is yet to communicate anything regarding such an extension, she said.

Ever since the windows were opened, local and foreign banks in India have been aggressively tapping them to bring in dollars and swapping them at a concessional rate with the RBI, since the cost of such funds was cheaper than borrowing locally.

SBI has raised about $500 million through these windows and aims to reach about $1 billion before November 30, Bhattacharya said, adding that this was because the bank started late.

So far, Bank of India (BOI) and Bank of Baroda (BoB), which have sizeable foreign operations, are understood have raised significant amounts via FCNR deposits, in particular.

Sources say the central bank had given an unofficial target of $2 billion to SBI, while BOI and BoB were given a target of $1 billion each.

Among private sector players, HDFC Bank and Kotak Mahindra Bank have been among the more active players, even as foreign banks have led the fund raising due to their ability to provide leverage to customers.

I dont know if it will be extended, but I do believe upwards of $20 billion will come by the end of November. We have played our part, approximately about 10% of that we would have brought in, said Aditya Puri, managing director and chief executive officer, HDFC Bank.

Economic affairs secretary Arvind Mayaram recently said that about $25-30 billion would come in through these two special forex swap windows before they close.

The special window allows banks to swap fresh FCNR (B) dollar funds, mobilised for a minimum tenure of three years and over, at a fixed rate of 3.5% per annum for the tenure of the deposit. The RBI also allowed banks to borrow up to 100% of Tier-I capital from overseas, which can be swapped with the central bank at a concessional rate of 100 bps below the ongoing swap rate prevailing in the market. These measures were announced to stabilise the depreciating rupee, which had fallen to a historic low of 68.80 per dollar on August 28.