FCNR(B) Deposits Set to Surge Past 2013 Record; Forex Inflows Projected at $80-$85 Billion as RBI Measures Take Effect
SBI Research indicates that Foreign Currency Non-Resident (Bank) deposit mobilisation may have already surpassed the total amount raised during the 2013 special deposit scheme in a remarkably short timeframe. The expectation is that current RBI measures will drive total forex inflows to reach $80-$85 billion, signalling strong market response to foreign currency instruments.As reported by the Reserve Bank of India, total inflows stood at approximately $20.7 billion up to July 17. A significant portion of this inflow came through FCNR(B) deposits, which accounted for $17.4 billion.
FCNR(B) Deposits Expected to Hit Major Milestone in Short Period
SBI estimates that the growth trajectory suggests FCNR(B) deposits have already exceeded the $26 billion mobilized during the 2013 scheme, a figure that took nearly three months to achieve. The outlook for this instrument is highly positive.The research projects that FCNR(B) deposit inflows will reach between $65 and $70 billion by the close of the current scheme, considerably higher than earlier forecasts ranging from $40 to $45 billion. When Overseas Foreign Currency Borrowings (OFCBs) and External Commercial Borrowings (ECBs) are included, total expected inflows stand at $80-$85 billion.
Deposit Renewals and Public Sector Banks Drive Inflow Momentum
The momentum in deposit mobilisation is largely attributed to the anticipated renewal of existing deposits, particularly those maturing in August and September. A substantial share of these maturities are likely to be renewed under the current scheme due to prevailing higher interest rates.SBI Research estimates that renewals alone could account for up to $10 billion in new inflows. While FCNR(B) has shown strong growth, the Foreign Currency Account (FCA) has risen by $7.6 billion since June 8. However, FCA growth is anticipated to accelerate significantly, reaching between $17 and $20 billion by the end of July.
SBI Warns Over Rupee Weakness Amid Global Market Trends
Despite robust inflows in FCNR(B), SBI Research has sounded a warning regarding the continued weakening trend of the rupee. The firm argued that the intervention conducted by the RBI in the foreign exchange market has not been forceful enough to mitigate currency depreciation risks.The central bank is noted to be intervening at an average rate of $14 million per day, which was highlighted as insufficient when considering India's approximate foreign exchange reserves of $676 billion. This contrasts sharply with the scale of intervention seen during the 1997-98 period, where the daily average was around $55 million.
Looking at the balance of payments (BoP), SBI expects a positive shift in FY27. The BoP is projected to swing into a surplus exceeding $50 billion, a notable reversal from an earlier estimate that pointed toward a deficit of $65-$70 billion. The current account deficit is nevertheless projected to stand between 1.0 and 1.2 percent of GDP.
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