RBI clarifies FCNR-B rules, fresh NRI inflows may support Rupee

Mumbai, June 23 (IANS) The Reserve Bank of India (RBI) on Tuesday issued clarifications on the operational aspects of Foreign Currency Non-Resident Bank (FCNR-B) deposits, addressing queries raised by banks regarding the mobilisation of such deposits and related lending activities.

The clarification is expected to encourage greater inflows through the FCNR-B route, which could provide support to the rupee in the near term.

According to a document released by the central bank, all Indian banks, including their overseas branches, are permitted to extend loans to non-residents or issue standby letters of credit (SBLCs) in favour of overseas lenders against FCNR-B deposits mobilised by them.

The RBI clarified that banks can also extend loans to FCNR-B account holders and are allowed to mark a lien on such deposits. The move provides greater operational flexibility to banks in raising foreign currency deposits from non-resident Indians.

The central bank further stated that banks will be eligible to undertake foreign exchange swaps with tenors of less than three years, provided they have mobilised fresh eligible FCNR-B deposits with a minimum original maturity of three years under the special scheme.

Under the arrangement, the RBI will offer a plain buy-sell foreign exchange swap facility to banks. The swap support will cover only the principal amount of the deposits and will not include the interest component.