RBI: $20 Billion Raised Under Special Foreign Currency Scheme

RBI Reports $20 Billion Mobilised Under Special Foreign Currency Scheme

The Reserve Bank of India (RBI) on Monday said that $20 billion has been mobilised under a special foreign currency scheme. The scheme, designed to attract foreign currency deposits from non-resident Indians (NRIs) and other entities, has exceeded initial expectations.

According to the central bank, the funds have been parked in special accounts offered by Indian banks. The move is part of a broader strategy to shore up India's foreign exchange reserves and provide a buffer against global economic volatility.

Scheme Details and Impact

The special scheme was launched earlier this year, offering competitive interest rates on foreign currency deposits. Banks were allowed to offer rates slightly above the London Interbank Offered Rate (LIBOR) to attract inflows.

RBI officials noted that the mobilisation has been smooth, with participation from both retail NRIs and institutional investors. The $20 billion figure represents deposits received over a defined window, which has now closed.

Industry analysts say the influx provides a significant cushion for India's forex reserves, which have faced pressure due to rising crude oil prices and a strong US dollar. As of early July, India's forex reserves stood at roughly $600 billion.

Rupee Stability and Market Reaction

The announcement comes as the Indian rupee has been trading near record lows against the dollar. The RBI has been intervening in the forex market to curb volatility, and the fresh deposits are expected to ease some of that pressure.

Market participants welcomed the news. Bond yields eased marginally on Monday, while the rupee strengthened by 0.2% against the greenback in afternoon trade. Traders said the RBI's ability to rope in $20 billion signals strong confidence among the diaspora.

However, some experts caution that the scheme is a short-term fix. The deposits are for a fixed tenure, typically three to five years, meaning the funds will eventually need to be repaid. The RBI will need to manage this maturity risk carefully.

What Happens Next

The RBI is likely to monitor the deployment of these funds closely. A portion may be used to finance imports or repay short-term external debt. The central bank has not announced any immediate follow-up scheme, but officials have indicated they will assess the need based on global conditions.