New Delhi, Nov 2 (): Forex reserves of India rose to a 100-day high as the central bank RBI raised more than $12 billion through the special deposit and swap facility recently launched by governor Raghuram Rajan.
Forex (foreign exchange) reserves have registered an increase by over $8 billion since Rajan took over on September 4. It is now at $282.951 billion at the end of October 25, RBI said in its weekly statistics report.
Soon after taking charge, Rajan had announced a special subsidized window for swapping overseas foreign currency borrowings and foreign currency non-resident (banks) deposits to attract dollars and stem rupee’s free fall against the dollar. The facility will end on November 30.
RBI as the regulator allowed banks to exchange FCNR (B) deposits, with a minimum three years maturity and having a one year lock-in period , at a fixed rate of 3.5% for the tenure of the swap. It also removed restrictions for banks’ overseas borrowing norms and gave them permission to raise capital abroad up to 100% of their paid-up equity capital.
The reserves have grown for the fourth straight week since September 27 on overseas money flows. The forex reserves have grown by $6.7 billion in the last one month. Forex reserves in terms of rupee rose from Rs 282 billion to Rs 17.462 billion in one month.
RBI to attract dollars told banks to raise interest rates on NRI deposits. NRIs invested dollars in deposit schemes in Indian banks to make the most of the interest rate difference and the rupee’s depreciation. At prevailing rate, investors get Rs 62 for every dollar invested, more than 15% than what they used to get seven months back.
NRIs in the Gulf countries borrowed locally at low rates and deposited the money in Indian banks to avail of the opportunity. In the week to October 25, foreign currency asset reserves rose from $1.8 billion to $255 billion,RBI said. Foreign currency assets seen in dollar terms are due to the effect of depreciation or appreciation of non-US currencies like the yen, euro, pound kept in the reserves.