India may see up to $50 billion forex inflows in FY27 under RBI’s latest measures: Report
New Delhi, June 12 (IANS) The Reserve Bank of India’s (RBI) latest measures to boost foreign currency inflows are expected to strengthen the country’s forex reserves, improve banking system liquidity and support the rupee, with total inflows estimated at $40–50 billion in FY27, a report showed on Friday.
As per an analysis by Motilal Oswal Financial Services Ltd (MOFSL), banks could benefit from a reduction of around 200–250 basis points in borrowing costs through the ECB route under the RBI’s concessional swap framework.
Lower funding costs are expected to support credit growth, strengthen lending activity and improve funding efficiency across the banking sector, it said.
The latest initiative resembles a similar RBI programme introduced in 2013, which had resulted in FCNR(B) deposit inflows of nearly $27 billion and overall NRI deposit inflows of around $34 billion.
In addition, that programme had contributed to strengthening India’s foreign exchange reserves and improving stability in the currency market.
According to the report, FCNR(B) deposits currently account for only around 1.2 per cent of the banking system’s total deposits, suggesting substantial room for expansion.
However, banks have already started raising FCNR(B) deposit rates across key maturities to improve the attractiveness of these products for non-resident Indian customers.
The brokerage said banks with stronger customer franchises and established overseas networks are likely to benefit the most and capture a larger share of expected inflows.
It further highlighted that the structure of the current framework creates advantages for both depositors and banks, encouraging greater participation.
According to the brokerage, stronger foreign currency inflows, improved liquidity and higher reserve buffers could support overall currency stability and strengthen investor confidence.
MOFSL has estimated that the rupee could strengthen towards the 93–94 range against the US dollar in the near term as inflows gather pace.
Additionally, FCNR(B)-linked funding provides banks with a spread advantage of around 60–65 basis points over traditional wholesale deposits because of exemptions from Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) requirements.
Notably, the central bank recently introduced special facilities for Foreign Currency Non-Resident [FCNR(B)] deposits and external commercial borrowings (ECBs), allowing banks to raise overseas funds at comparatively lower costs.
The measures are intended to attract foreign capital, improve resource mobilisation and enhance overall liquidity conditions in the banking system at a time when global market volatility and capital flow trends remain under focus.
–IANS
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