India Mobilises $127 Billion in Diaspora Deposits to Boost Forex Reserves

Indian banks mobilised a record $127.2 billion in foreign-currency deposits from the Indian diaspora under a special Reserve Bank of India (RBI) scheme, providing a major boost to the country’s foreign-exchange position amid pressure on the rupee.

The deposits were raised through the Foreign Currency Non-Resident (Bank) or FCNR(B) scheme, which was introduced in June to attract foreign currency from overseas Indians. The programme received such a strong response that the RBI closed the deposit window on August 31, ahead of its originally scheduled September-end deadline.

Overall, India attracted $136.3 billion in foreign-currency inflows through the special measures by August 31. FCNR(B) deposits accounted for the bulk of the inflows, while $5.26 billion came through overseas foreign-currency borrowings and $3.89 billion through external commercial borrowings.

The RBI’s move was aimed at strengthening India’s external finances and providing support to the rupee at a time when higher oil prices and global economic uncertainties were putting pressure on the currency. The large inflows have also helped strengthen the country’s foreign-exchange reserves, which reached around $729.33 billion, according to recent reports.

The large inflow also creates a challenge for monetary management. The conversion of foreign currency into rupees can increase domestic liquidity, requiring the central bank to carefully manage surplus funds in the banking system.

The record mobilisation highlights the continuing financial importance of India’s overseas community and its growing role in supporting the country’s foreign-exchange stability.