RBI Introduces US Dollar-Rupee Forex Swap Facility For Fresh FCNR Deposits

• The facility applies to fresh FCNR(B) deposits mobilised by banks for a minimum tenor of three years and a maximum of five years.

• Under the swap, banks can sell US dollars to the RBI and buy back the same amount at the end of the swap period.

• The underlying deposits will have a one-year lock-in, though banks may allow premature withdrawal after that.

The Reserve Bank on Monday introduced a US dollar-rupee forex swap facility for fresh FCNR (B) deposits mobilised by banks for a minimum tenor of three years and a maximum of five years to attract foreign capital.

Foreign Currency Non-Resident (Bank) deposits are foreign currency term deposits maintained by non-resident Indians (NRIs).

Under the swap arrangement, a bank can sell US Dollars in multiples of USD one million to the RBI and simultaneously agree to buy the same amount of US dollars at the end of the swap period, a central bank circular said.

The swap facility will be available to the AD Category I banks for fresh FCNR (B) deposits mobilised in any freely convertible currency, including deposits that are renewed upon maturity, for a minimum tenor of three years and a maximum tenor of five years.

However, the swap facility with RBI will be available in US dollars only.

"The underlying deposits will have a lock-in period of one year. The banks may, at their discretion, allow premature withdrawal of such deposits after one year, as per their internal policy," the Reserve Bank of India (RBI) said.

However, swaps undertaken with the RBI cannot be cancelled.

Last week, the RBI announced a series of measures to attract overseas funds and ease external financing conditions.

Through another circular, the RBI also announced to introduce a US Dollar-Rupee Forex Swap Facility for external commercial borrowings (ECBs) of average maturity of three years and above by public sector undertakings (PSUs).

The swap facility has also been introduced for Overseas Foreign Currency Borrowings (OFCBs) raised by Authorised Dealer Category I banks for a minimum maturity of 3 years.