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Reversing the trend of being a net buyer of dollars for three months in a row, the Reserve Bank of India (RBI) became a net seller of the US currency in January 2014.
It sold dollars worth $1.92 billion in the month, buying $375 million and selling $2.3 billion. The central bank was a buyer on a net basis in October-December 2013, as banks received huge dollar flows into Foreign Currency Non-Resident (Banks) deposits, backed by RBI’s offer to swap dollars. Under this window, banks could swap fresh FCNR (B) dollar funds (deposits with a maturity period of at least three years) at a fixed 3.5 per cent a year. The window was open till November 30, 2013. RBI also offered banks a swap on their foreign borrowings. The two windows mobilised a sum of $34 billion.
In December, the central bank purchased a net $3.48 billion, down from $10.08 billion in November. It had mopped $3.9 billion in October. Net forward sales in January were $31.84 bn, down from $32.6 billion at the end of December.
As for money flowing into NRI (non-resident Indian) deposits, the pace moderated further in January.
The net flows declined to $510 million, from $1.28 billion in December 2013. After RBI closed the swap facility for FCNR (B) deposits in November 2013, the flow of money into NRI deposits dived to $1.28 billion in December from the huge sum (inflow) of $13.71 billion in November.
Outstanding NRI deposits rose in January to $99.14 billion from $98.63 billion in December 2013. Under the FCNR (B) category, these were $40.7 billion at the end of January, up from $40. 4 billion in December.
In August and September 2013, RBI took many steps to attract NRI deposits, to attract foreign exchange, to stem the fall in the rupee’s value against the dollar.
