Rupee gains on FCNR(B) deposits reverse amid crude price spike: RBI report

Commercial banks in India mobilised roughly $133 billion in Foreign Currency Non‑Resident (FCNR) (B) deposits after the Reserve Bank of India opened a concessional swap window in June. The influx of foreign‑currency funds had initially supported the rupee, but a recent spike in crude oil prices reversed that gain, prompting a dip in the currency. The RBI’s report notes that the surge in deposits was a direct response to the swap window, which offered banks a cheaper avenue to hedge foreign‑currency exposure. The unexpected rise in crude prices offset the rupee’s earlier appreciation, underscoring the sensitivity of the Indian currency to global commodity movements. The FCNR(B) scheme, designed to attract offshore deposits, was consequently closed a month earlier than planned, reflecting the central bank’s assessment of market conditions. What to watch: future RBI policy moves as crude price volatility persists.

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This article is AI-generated and fact-gated. Original reporting: Business Standard