The heads of private and public sector banks will meet Reserve Bank of India (RBI) Governor Sanjay Malhotra on Tuesday to chalk out a roadmap for boosting inflows into the special foreign currency non-resident (FCNR(B)) deposit scheme and address operational hurdles that may be constraining forex mobilisation.
The CEOs of private sector banks will meet the Governor in the morning, followed by chiefs of state-owned banks in the afternoon. Apart from FCNR(B) deposits, the discussions are also expected to cover deposit mobilisation, credit growth and other banking issues.
The meetings come a day after Finance Minister Nirmala Sitharaman reviewed the progress of the RBI’s forex mobilisation measures with chiefs of public sector banks.
The meeting was attended by the Secretaries of the Departments of Financial Services, Economic Affairs and Revenue, Chief Economic Adviser, RBI Deputy Governor Rohit Jain, senior government officials, and the heads of NaBFID, NABARD and SIDBI.
According to bankers present at the meeting, one of the key issues flagged was the rise in overseas interest rates by around 50 basis points since the RBI announced the swap facility, reducing the attractiveness of FCNR(B) deposits.
Bankers also highlighted difficulties in completing know-your-customer (KYC) formalities through representative offices in certain overseas markets, particularly the UAE. This poses a challenge for banks that do not have branches in those jurisdictions.
“The finance minister said the ministry will discuss the KYC issue with the RBI and explore additional measures or regulatory relaxations that could help enhance forex inflows from West Asia,” said a senior banker who attended the meeting.
Sitharaman asked public sector banks to step up outreach to non-resident Indians (NRIs), introduce innovative foreign currency deposit products and make full use of GIFT City to mobilise overseas deposits, according to an official statement.
Bank chiefs told the finance minister that the scheme has generated strong interest among NRIs, particularly in Singapore, Hong Kong, West Asia, the US and the UK.
They also said external commercial borrowings (ECBs) are expected to gather momentum during the October-December quarter of the current financial year.
The managing directors and chief executive officers of banks and public financial institutions said the response from the Indian diaspora to FCNR(B) deposits, ECBs and overseas foreign currency borrowings (OFCBs) has been encouraging. They outlined plans to build on this momentum and accelerate deposit mobilisation during the remaining tenure of the scheme.
Public sector banks also informed the government that they have rolled out customised outreach programmes, including digital initiatives, to engage the NRI diaspora. They added that FCNR(B) deposit mobilisation has begun to accelerate, aided by attractive returns being offered by banks.
During the meeting, RBI Deputy Governor Rohit Jain assured banks that the central bank would continue to support lenders in mobilising deposits and facilitating eligible overseas borrowings.
Announced in the RBI’s June 5 monetary policy, the package includes a par US dollar-rupee swap facility for fresh FCNR(B) deposits and a concessional swap facility for eligible ECBs and OFCBs. The measures are aimed at attracting foreign capital, strengthening India’s balance of payments and boosting capital inflows.
Fresh FCNR(B) deposits with maturities of three to five years are eligible under the scheme until September 30, 2026, while the concessional facilities for ECBs and OFCBs will remain available until December 31, 2026.