The 2013 RBI FCNR(B) Swap Window – Review & Takeaways
In the wake of recent volatility in our currency markets, commentators have – somewhat prematurely - started to recall the extraordinary steps taken by RBI in 2013. To recap, post the Bernanke taper tantrum of mid-2013, besides other steps, the RBI announced two special swap windows in September 2013. First, it offered to swap US$ raised by banks from foreign currency non-resident (FCNR) deposits of maturity 3-year and above into INR, at a concessional rate of 3.5% p.a. This was about 3.0% cheaper than the average market during the period. Second, it allowed banks to borrow additional FCY funds from overseas and swap them into INR at a concessional rate of 1% below market. Collectively, the two swap windows brought in $34B at a crucial time for India. The first swap against FCNR(B) deposits, in particular, exceeded all expectations and raised $26B of 3-year and above money – much more than the previous schemes of India Millennium Deposits (