RBI Reviews FCNR(B) Swap Scheme, Push For Rupee Trade With Bank CEOs

The Reserve Bank of India (RBI) has reviewed the implementation of its recent foreign exchange and financial sector initiatives, including the concessional Foreign Currency Non-Resident (Bank) or FCNR(B) swap facility. The recently implemented features were reviewed at a meeting with managing directors and chief executive officers of major domestic banks.

The meeting, chaired by RBI Deputy Governor Rohit Jain, focused on the progress in the enforcement of various measures announced by the central bank and on formulating ways to speed up their implementation. Banks had submitted updates and supporting data ahead of the discussions.

FCNR(B) Scheme Takes Centre Stage

One of the key themes discussed at the meeting was the FCNR(B) swap facility announced by the RBI. The facility was announced on June 5 to encourage foreign currency inflows. Under the arrangement, banks have been allowed to swap fresh FCNR(B) dollar deposits with the RBI, while incremental deposits have been exempted from cash reserve ratio (CRR) and statutory liquidity ratio (SLR) requirements.

The review has come as banks have started raising interest rates on FCNR(B) deposits to attract funds from non-resident Indians. Some lenders have offered rates of more than 7 per cent on deposits with maturities of three to five years.

According to news agency Reuters, banks have also sought regulatory clarity on a guarantee-related provision that they believe could help increase inflows from the Indian diaspora. The request has come as lenders have stepped up efforts to mobilise overseas deposits under the RBI's latest measures.

Focus On Rupee Trade And Digital Initiatives

Apart from the FCNR(B) facility, RBI also reviewed pending export and import payment entries under the Export Data Processing and Monitoring System (EDPMS) and Import Data Processing and Monitoring System (IDPMS).

The central bank and bank executives have also discussed measures to expand the use of the Unified Lending Interface (ULI) and the central bank digital currency (CBDC). Another area of focus has been increasing retail foreign exchange (forex) transactions and encouraging cross-border trade settlements in rupees as part of efforts to promote wider use of the domestic currency in international trade.

The central bank and banks have also reviewed issues related to gold monetisation and metal loans. Discussions have covered measures to improve the utilisation of the country's domestic gold stock and to improve the efficiency of gold-related financial products.