Special swaps bring $143.5 billion forex inflows

Data showed banks mobilised $132.9 billion via FCNR(B) deposits under the central bank's special swap window, taking total special-swap inflows to $143.5 billion by Sept. 18. Market reaction pending.

FCNR(B) led inflows

Data showed the FCNR(B) facility accounted for the bulk of the take-up, with the total package more than five times the amount raised under a similar 2013 scheme. Banks raised a large share of the funds in the final 10 days of the window, the data showed.

Officials said the special swaps have supported dollar inflows into the banking system while ECB and OFCB routes also contributed to the aggregate. The central bank has kept the overseas borrowing options open through Dec. 31, officials said.

Officials said rising global bond yields could weigh on further overseas borrowing through ECBs and OFCBs, making future issuance conditional on international rate moves and investor appetite. That mechanism would reduce the incentive for banks to issue external commercial borrowings if overseas financing costs climb.

Markets will watch gross weekly and monthly flow data up to Dec. 31, the swap-window deadline, for signs of whether demand for external funding and dollar liquidity will hold through year end.