RBI Forex Measures Attract Nearly $32 Billion, Largely Through FCNR(B) Deposits: Governor Sanjay Malhotra
Strong Response to Central Bank’s Steps Bolsters Forex Reserves and Helps Ease Pressure on the Rupee
Reserve Bank of India (RBI) Governor Sanjay Malhotra on Monday said that the central bank’s recent foreign exchange measures have attracted nearly $32 billion in inflows, with a large portion coming through the FCNR(B) route. The strong response has provided significant support to India’s forex reserves and helped stabilize the rupee amid global uncertainties.
Governor’s Statement
Speaking at a public interaction, Governor Malhotra highlighted that the special measures announced by the RBI to encourage foreign currency inflows have met with encouraging success. “The response has been very good. We have received close to $32 billion, largely through the FCNR(B) channel,” he said.
The Governor noted that these inflows have strengthened the country’s external buffers at a time when global financial markets remain volatile and capital flows are sensitive to interest rate differentials and geopolitical developments.
What Are FCNR(B) Deposits?
FCNR(B) or Foreign Currency Non-Resident (Bank) deposits allow non-resident Indians (NRIs) and persons of Indian origin to hold deposits in foreign currencies such as the US dollar, pound sterling, euro and others with Indian banks. These deposits are popular because they protect depositors from exchange rate fluctuations while offering competitive returns.
The RBI had earlier relaxed certain norms and offered incentives to make FCNR(B) deposits more attractive, which appears to have yielded results.
Why These Measures Were Needed
The Indian rupee has faced intermittent pressure in recent months due to a combination of factors, including elevated crude oil prices, global risk aversion and foreign portfolio outflows. In response, the RBI introduced targeted measures to attract stable foreign currency deposits and reduce volatility in the forex market.
By drawing in substantial FCNR(B) deposits, the central bank has been able to augment its foreign exchange reserves without resorting to more aggressive market interventions.
Impact on Forex Reserves and the Rupee
The $32 billion inflow has provided a meaningful boost to India’s foreign exchange reserves, which remain among the highest in the world. Higher reserves enhance the country’s ability to manage external shocks and intervene in the currency market when required.
Market participants believe the inflows have also helped limit the depreciation of the rupee. A more stable currency environment benefits importers, reduces imported inflation risks and improves overall macroeconomic confidence.
Banking Sector Implications
Indian banks have been active in mobilising FCNR(B) deposits under the relaxed norms. These deposits provide banks with foreign currency liquidity, which can be used for lending to exporters or for managing their own forex positions.
The surge in FCNR(B) deposits is expected to support banks’ balance sheets and improve their foreign currency funding profile. Several large public and private sector banks have reported healthy growth in such deposits in recent months.
Expert Views
Economists and forex analysts have welcomed the development. “Attracting stable, non-debt creating inflows through FCNR(B) is a smart approach. It strengthens reserves while avoiding the volatility associated with portfolio flows,” said one senior economist.
Analysts also noted that the success of these measures reflects confidence among NRIs in the Indian banking system and the country’s medium-term economic prospects.
Broader Context
India has been carefully managing its external sector in an environment of elevated global interest rates and geopolitical tensions. While foreign portfolio investors have shown mixed behaviour, stable inflows through banking channels such as FCNR(B) and ECB (External Commercial Borrowings) have provided valuable support.
The RBI has repeatedly emphasised that it does not target a specific level for the rupee but remains focused on containing excessive volatility. The latest inflows give the central bank greater flexibility in pursuing that objective.
Outlook
Governor Malhotra’s comments suggest that the RBI remains watchful of global developments and stands ready to take additional measures if needed. Market participants will closely track further data on forex inflows, reserve movements and rupee behaviour in the coming weeks.
For now, the nearly $32 billion attracted through the central bank’s forex measures, largely via FCNR(B) deposits, stands as a notable success in reinforcing India’s external resilience.
