Story
Reserve Bank of India to End Forex Swap Facility Early After Strong Inflows
The Reserve Bank of India (RBI) announced Friday it will end its discounted foreign exchange swap facility for banks one month earlier than planned, following significant capital inflows attracted by the measure.
In a statement, the central bank said the window for banks to use the zero-cost hedging tool for Foreign Currency Non-Resident (FCNR(B)) deposits will now close on August 31, moved up from the original deadline of September 30.
Strong Inflows Prompt Early Closure
The RBI launched the facility in June as part of a broader package of measures aimed at improving India's balance of payments position. The central bank cited the program's success as the reason for its early termination.
"Given the positive response to the FCNR(B) deposit swap facility and the sizable foreign exchange inflows received, the central bank has decided to terminate the scheme ahead of schedule," the RBI stated. According to data released by the bank, the measures have attracted a total of $5.68 billion between June 8 and August 13.
AdBreakdown of Capital Flows
The inflows during this period came from several of the RBI's targeted measures:
- FCNR(B) deposits mobilized by banks accounted for the vast majority, bringing in $5.23 billion.
- An additional $170 million was raised through the external commercial borrowing (ECB) swap facility.
- Overseas foreign currency borrowing by authorized dealer banks contributed $280 million.
While the FCNR(B) swap window is closing early, the RBI confirmed that the related windows for external commercial borrowings and overseas foreign currency borrowing will remain open until the end of the year, as originally planned.
Read next
More on Forex
Polish Zloty Hits 11-Month Low Against Euro on Energy Price Pressure
The Polish zloty weakened to 4.410 against the euro, its lowest point since November 2023, as rising energy prices and caution ahead of a U.S. Federal Reserve decision weighed on the currency.
Sterling Slips as Dollar Strengthens Ahead of Fed Decision and UK Budget
The British pound lost ground against a resurgent U.S. dollar on Wednesday as market attention shifted from tech sector volatility to upcoming central bank decisions and the UK budget announcement.
Eurozone Bond Yields Climb as French Fiscal Concerns Return Ahead of Fed, ECB Decisions
Yields on French and German government bonds rose as relief from a ratings affirmation for France proved temporary, with investors refocusing on fiscal challenges and awaiting key policy verdicts from the U.S. Federal Reserve and the European Central Bank.
Canadian Dollar Slips as Markets Await Bank of Canada, Fed Decisions
The Canadian dollar edged lower against its U.S. counterpart, snapping a seven-day winning streak as investors adopted a cautious stance ahead of Wednesday's key interest rate announcements from both the Bank of Canada and the U.S. Federal Reserve.