India Lets NRIs Leverage Deposits to Draw Dollars

The Reserve Bank of India (RBI) announced a new facility on September 13, 2023, allowing Non-Resident Indians (NRIs) to deposit foreign currency with banks, which can then be swapped with authorized dealers for Indian Rupees. This swap facility, however, covers only the principal amount of the deposit and does not extend to the interest earned. The initiative aims to encourage NRIs to bring more dollars into the country, thereby bolstering foreign exchange reserves. The swap is structured such that the authorized dealer bank will bear the exchange rate risk. This measure is part of a broader effort by the Indian government and the RBI to manage the country's current account deficit and stabilize the rupee against a strengthening US dollar. The facility is expected to be available for a limited period, though the exact end date was not specified in the initial announcement. Banks will be able to undertake these swaps within their overall open foreign currency position limits. The RBI stated that the swap would be on a consolidated basis for each bank, and the exchange rate for the swap would be the spot rate on the date of the transaction. This move follows previous measures taken by the RBI to attract foreign currency inflows, including similar swap windows introduced in 2013.