The central bank’s recent measures to attract foreign capital have brought in nearly $32 billion so far, RBI Governor Sanjay Malhotra said in a media interview, with a major part of it flowing in through the FCNR(B) route.

The inflows have continued to stay strong as the Reserve Bank of India (RBI) had earlier said that banks had drawn in $20.72 billion until 17 July under its three concessional swap facilities, with $17.4 billion alone coming from foreign currency non-resident (Bank), or FCNR(B), deposits. External commercial borrowings (ECBs) pulled in $1.34 billion while $1.97 billion came through overseas foreign currency borrowings (OFCBs).

"Till date, banks have mobilised almost $32 billion," Malhotra told Hindu BusinessLine in an interview. "Obviously, most of it is coming through FCNR(B) deposits. The figures related to ECBs and OFCBs are lumpy. In addition, we have got more than $7 billion in inflows into government securities since June 5, when the policy announcements with respect to government securities were made. At this pace, the total inflows are likely to be robust.”

Dismissing concerns that the inflows merely represent a recycling of existing deposits, Malhotra said there is no significant cause for concern at this stage. “We are keeping a very close watch on this. We do not find any prima facie evidence of recirculation of the existing deposits, in whatever form, to be of any significance or concern," he told the business daily.

On 5 June, the RBI offered concessional swaps to attract foreign exchange inflows, a move aimed at bolstering India’s balance of payments and providing protection to the rupee. The RBI has kept the window open for fresh FCNR(B) deposits, with maturities of three to five years, until 30 September, while for ECBs and OFCBs the period is till 31 December.

On RBI bearing the exchange risk on the FCNR(B) scheme and what impact it would have on its balance sheet three years down the line, Malhotra said it is “not something that should be a matter of concern because we have a fool-proof system of hedging ourselves”. 

He further said, “So, whatever dollars we get, the excess foreign currency is invested in foreign assets, so the risk is not there.”

Malhotra told the business daily that the RBI’s measures should be viewed in the context of challenging global conditions facing emerging markets and are expected to further strengthen India’s balance of payments and currency stability.

On the rupee, the RBI governor reiterated that it would be reasonable to think that the rupee is not overvalued. “If anything, one could argue that the rupee has become undervalued, both in nominal and in REER (real effective exchange rate) terms. Once the situation in West Asia stabilises, one could very well see the rupee appreciate as one has seen during similar past periods and episodes of external shock-driven volatility,” he said.