Daijiworld Media Network - New Delhi
New Delhi, Jul 14: The Centre has directed state-owned banks to intensify efforts to mobilise foreign currency deposits from the Indian diaspora as part of measures to strengthen the country's external financial buffers and support the rupee.
During a meeting held on Monday, Finance Minister Nirmala Sitharaman urged public sector banks to enhance engagement with non-resident Indians (NRIs) through outreach programmes, digital platforms and innovative foreign currency deposit products, according to an official statement.
The move comes amid efforts to attract more overseas deposits as geopolitical tensions in West Asia continue to exert pressure on the rupee and India's foreign exchange reserves.
Reserve Bank of India (RBI) Governor Sanjay Malhotra is also scheduled to meet chief executives of public and private sector banks on Tuesday to formulate a strategy to increase foreign currency deposit inflows and address operational challenges affecting fund mobilisation.
In June, the RBI announced measures to encourage banks to raise foreign currency deposits by offering full support for hedging costs on deposits with maturities of three to five years. It also permitted banks to borrow against such deposits.
With the RBI subsidising the hedging costs, banks are offering interest rates of up to 7.5 per cent on eligible deposits. Analysts and bankers expect the initiative to attract overseas deposits worth around USD 50 billion.
The current initiative is similar to the 2013 scheme launched during the global "taper tantrum", when India mobilised nearly USD 34 billion to stabilise the rupee.
Sitharaman also advised state-run banks to make greater use of the banking infrastructure available at Gujarat International Finance Tec-City (GIFT City) to raise overseas funds.
According to the statement, chief executives of public sector banks informed the finance minister that foreign currency deposits had gained momentum, supported by attractive interest rates.
They said Indians living in Singapore, Hong Kong, the Middle East, the United Kingdom, the United States and several other countries had shown significant interest in the deposit schemes.
The bankers also reported strong interest among Indian companies seeking to raise funds overseas and expressed confidence that such borrowings would increase during the October-December quarter.