According to SBI Research, the research arm of the country’s largest state-owned bank, the amount of deposits under ‘Foreign Currency Non-Resident (Bank)’ (FCNR(B)) deposits in India may exceed the total amount deposited during the Special Deposit Scheme in 2013 – and all this in just 45 days. Research estimates that the total inflow under the current RBI measures will eventually reach $80-85 billion. The Reserve Bank of India had recorded total inflows of $20.7 billion till July 17, which included $17.4 billion from FCNR(B) deposits. Based on subsequent trends, SBI estimates that FCNR(B) deposits have crossed the $26 billion mark recorded during the scheme’s 2013 run; At that time it took about three months to reach this figure.
**Estimated Inflow: SBI Report**
SBI Research now estimates that FCNR(B) deposits will reach $65-70 billion by the time the scheme closes – significantly higher than its previous estimate of $40-45 billion. Combined with Overseas Foreign Currency Borrowings (OFCBs) and External Commercial Borrowings (ECBs), the report estimates total inflows to reach $80-85 billion. This increase in deposits will be mainly due to government banks. A large portion of FCNR(B) deposits maturing in August and September are likely to be renewed under the new scheme as it offers higher interest rates. SBI Research suggests these renewals alone could yield $10 billion.
**SBI warning**
FCNR(B) inflows stood at $17.4 billion as of July 17, while foreign currency assets (FCA) have increased by only $7.6 billion since June 8, the report said. The report also said that the pace of increase in Foreign Currency Assets (FCA) may increase to $17-20 billion by the end of July. However, SBI has warned that the rupee continues to weaken and argued that RBI’s intervention in the foreign exchange market has not been strong enough. The bank said the central bank is injecting an average of $14 million every day, which is quite low considering India’s foreign exchange reserves of about $676 billion. During 1997–98, an average of $55 million was intercepted daily. SBI has estimated a ‘balance of payments surplus’ (savings in the balance of payments) of over $50 billion for FY27, compared to a deficit of $65-70 billion before the move. Current account deficit is estimated to be 1.0-1.2 percent of GDP.
**RBI Governor’s statement**
In an interview published in *The Hindu BusinessLine* on Monday, Central Bank Governor Sanjay Malhotra said about $32 billion has been mobilized through the dollar-inflow scheme announced by the Central Bank in June. He said that this is expected to improve India’s balance of payments. Malhotra said a major part of the $32 billion raised so far has come from the ‘Foreign Currency Non-Resident (FCNR) Deposit Scheme’. Additionally, there has been an inflow of about $7 billion in the form of foreign portfolio investment in debt securities following the tax changes. There is no evidence that a significant portion of the funds raised through FCNR came from rebooking of existing deposits.
**RBI’s stance on rupee**
The increase in government cash balance is also a reason why dollar inflow is not reflected in the liquidity of the rupee. There has been no change in RBI’s policy on the rupee, and the central bank only intervenes to prevent excessive fluctuations. It would be safe to assume that the value of the rupee has not been underestimated. Considering the current growth and inflation situation, the current level of policy repo rate is appropriate. Although inflation pressures have remained low so far, rising food and fuel prices pose a risk of broader inflationary increases.
