Adequate reserve to deal with $20 billion FCNR redemption

Adequate reserve to deal with $20 billion FCNR redemption thumbnail
NEW DELHI: Amid concerns over possible impact on markets of $20 billion outflows due to imminent maturity of a non-resident deposit scheme, the government sources today said there are adequate reserves to deal with these redemptions.

Government has option of rollover if investors want, highly-placed sources said.

When the rupee had a freefall to a life-time low of Rs 67.85 due to the US Federal Reserve ‘taper tantrums’ in the summer of 2013, India had mobilised $26 billion through foreign currency non-resident bank account (FCNR-B) deposits by offering a special swap window for banks. The three-year deposits are maturing starting September.

Concerns have mounted on the impact of these redemptions on rupee and bond markets with RBI Governor Raghuram Rajan, who is credited to have contained rupee volatility soon after joining RBI about three years ago, saying no to a second term after his current tenure ends on September 3.

Seeking to allay concerns, the sources said that government is ready to redeem $20 billion FCNR-B deposits as there is adequate forex reserves.

After touching a record high last week, the country’s foreign exchange reserves declined by $231 million to $363.233 billion in the week ended June 10.

In the previous week, the reserves had increased by $3.27 billion to hit an all-time high of $363.46 billion.

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