India expects to attract at least $80 billion in foreign-currency inflows through recent initiatives designed to draw dollars into the country, as announced by RBI Governor Sanjay Malhotra. The governor noted that the inflows have surpassed both the central bank's and most market participants' expectations. As of August 13, $56.85 billion has already been mobilized through these measures, with foreign currency non-resident (FCNR(B)) deposits alone accounting for $52.3 billion.
Malhotra also addressed the early closure of the FCNR(B) swap window, characterizing it as a "calibration" rather than a policy reversal, driven by data and rapidly evolving conditions. He explained that there is a diminishing marginal utility from each additional dollar swapped, alongside an increasing marginal cost due to the longer sterilization period required. The governor stressed that the decision to advance the closure was made from a position of strength, reflecting India's robust macroeconomic fundamentals.
The RBI chief further asserted that the central bank's net-short forward-dollar position, which has grown significantly over the past two years, remains "very manageable." He clarified that the exchange rate continues to be market-determined, with the RBI's intervention policy focused on curbing excessive volatility and speculative activity. Malhotra indicated that the foreign currency assets acquired through these swaps will expand the RBI's balance sheet, while the forward leg will be managed as a contingent liability.
