It seems there are no takers among the banks for latest forex liquidity product offered by the Reserve Bank of India (RBI) In the context of the global developments and in order to provide flexibility to Indian banks in managing their short-term funding requirements at their overseas offices, the RBI has decided to provide forex liquidity to Indian public and private sector banks having foreign branches or subsidiaries, through forex swaps of tenors up to three months.
The pricing of swaps will be based on the interest rates in the domestic as well as the overseas markets using the RBI?s bank reference rate for the USD-Rupee exchange rate. However both private and public sector banks have said that they don?t need the facility as they have sufficient liquidity to manage their overseas operations. OP Bhatt, chairman, State of India (SBI) which largest number of international branches said that the bank?s forex liquidity is robust and wouldn?t not opt for the forex borrowing.
Chanda Kochhar, joint managing directorand CFO, ICICI Bank said that ICICI Bank has not opted for the dollar loan in the recent times.
MD Mallya, chairman & managing director, Bank of Baroda, said that the liquidity is comfortable in all of bank?s 72 overseas branches. ?So, we may not appraoch RBI immediately. We will certainly avail of the facility as and when the need arise,?? he said.
JS Chiney, general manager, treasury, Bank of India, said “ We are able to manage liquidity by the proper asset liability management. Hence we may not need to approach RBI to avail the swap facility, BoI has got 28 overseas branches as of now which include 23 full-fledged and 5 rep offices and added Chiney.
VK Khanna, general manager, treasury, Union Bank of India, said “We will have to read the entire part of the guideline before thinking of approaching the RBI. All the banks operating overseas are funding their forex assets either through local deposits or through the line of credits (LoC) or just through bond issuances. Now we will have to find out if the facility was meant for those LoCs that are faced with redemption pressure or for the entire overseas assets.??
Commenting on the new facility Rohini Malkini said until now, banks needing forex were borrowing from other banks which was not only costly (as given a closed capital account, pricing was based on demand-supply rather than interest rate differentials) but also added pressure on the currency.
While the RBI has said that banks can fund the swaps by borrowing under the LAF, what is important to note is that it has said that it ?will be prepared to consider any specific relaxation of Statutory Liquidity Ratio (SLR) requirements for this purpose? . Although the RBI has not indicated the quantum, this move is positive and will help ease dollar shortages being faced by banks that have overseas operations, she observed.
