Banks estimate $30 billion via RBI’s special overseas deposit scheme: Report

Indian state-run banks have told senior government officials they expect to raise nearly $30 billion through the Reserve Bank of India’s subsidised dollar deposit window, five bankers familiar with the matter told Reuters.

The estimate was shared by the heads of public sector banks during a meeting with Finance Minister Nirmala Sitharaman and other finance ministry officials earlier this week, two of the sources told Reuters.

“The state-run banks have given estimates about the quantum of dollars each of them will be able to garner through the tenor of this scheme,” one of the bankers directly aware of the matter said. “The larger ones have estimated inflows of around $4-$5 billion, while the smaller banks will try and target $1-$2 billion.”

The bankers requested anonymity because the discussions were private. The finance ministry did not reply to a Reuters email seeking comment.

On June 5, the RBI announced a zero-cost foreign exchange swap facility for deposits raised from non-resident Indians, allowing banks to offer higher returns on such deposits. The scheme will remain open until September 30.

Earlier this week, Reuters reported, citing sources familiar with the matter, that India had attracted about $10 billion through the central bank’s special deposit programme, well below analysts’ estimates of $40 billion to $70 billion.

“The start has been slow, but we are confident of garnering $2 billion under this scheme till September, with major flows coming from the gulf and Singapore,” said Binod Kumar, managing director and CEO at Indian Bank, which has raised about $150 million so far.

On June 23, the central bank clarified that banks could lend against these deposits and place a lien on them, allowing leverage that could make the programme more attractive. Since then, inflows have increased, but three of the five bankers said officials expect most of the money to come closer to the scheme’s deadline, similar to the pattern seen in 2013.