Now Reading: RBI’s surprise FCNR move leaves banks scrambling
-
01
RBI’s surprise FCNR move leaves banks scrambling
The Reserve Bank of India's sudden decision to close the FCNR (B) swap window has left banks scrambling and raised concerns over policy communication. Markets reacted sharply, with the rupee recording its…
The Reserve Bank of India's sudden decision to close the FCNR (B) swap window has left banks scrambling and raised concerns over policy communication. Markets reacted sharply, with the rupee recording its biggest decline in nearly a month and underperforming other Asian currencies. Yields on five-year government debt also posted their biggest rise in more than a month, businesstoday.in reported.
The central bank's move followed criticism over the cost of the FCNR deposit scheme. Former RBI Governor Duvvuri Subbarao had told Bloomberg News that the deposits were costly. However, economists argued the cost was manageable. SBI Group Chief Economic Adviser Soumya Kanti Ghosh estimated the cumulative cost at about $10.5 billion against RBI's forex reserves of around $700 billion, and said cost was not a constraining factor. DBS Bank economist Radhika Rao also said hedging cost was unlikely to be the binding factor.
The scheme has attracted about $52 billion. Bankers estimate another $25 billion to $30 billion could flow in by end of August, potentially taking total mobilisation to $80-$85 billion. The closure has created operational challenges for banks like SBI, which had committed to raising $10 billion and had mobilised about $6 billion by early August. Bankers now have to redraw asset-liability profiles and accelerate paperwork, as opening FCNR accounts typically takes 15-20 days.
Indian Opinion Analysis
The reporting by businesstoday.in frames the RBI's decision as a surprise that has created market turmoil and operational chaos for banks, foregrounding communication concerns and quoting economists critical of the move. The piece notes the RBI's rationale, cost criticism by a former governor, but gives more weight to counter-arguments that the cost was manageable. This gives the story a government-critical slant on the policy communication front, while remaining neutral on the broader economic impact. A careful reader should note that while the closure disrupted bank plans, the scheme had already drawn strong inflows, suggesting the RBI may have judged the immediate goal met. The next concrete number to watch is the final FCNR (B) mobilisation figure by end of August.
Coverage: 1 source, 1 government-critical
Source: businesstoday.in (government critical)
This story was synthesised by AI from the source linked above.
