India has attracted more than $73 billion into the country in just 11 weeks through incentives for foreign-currency deposits from Indians living abroad, aimed at building financial buffers and easing pressure on the rupee. Of that amount, more than $65 billion came from Foreign Currency Non-Resident (Bank) deposits, or FCNR(B), which India's finance ministry described as one of the country's largest and fastest foreign-exchange mobilisation exercises. Nomura estimates deposits under the scheme could rise to nearly $80 billion before the measures end on 31 August, while Jefferies estimates inflows could reach as much as $100 billion by the end of this month, far exceeding a similar exercise in 2013 that drew about $26 billion over three months. The measures, in place since June, cover foreign-currency deposits by overseas Indians, banks' overseas foreign-currency borrowings, and external commercial borrowings. Gaura Sengupta, chief economist at IDFC First Bank, said the inflows give the Reserve Bank of India more room to intervene in currency markets to limit rupee volatility even as global energy prices have risen sharply. India is facing heavy foreign capital outflows, with foreign investors selling a net $24.5 billion of Indian equities from the start of the year through August, while the trade deficit from April to July widened to $49.3 billion from $32.3 billion a year earlier. Energy imports, which account for more than a quarter of total imports, rose nearly 22%, contributing to a roughly 6.5% depreciation in the rupee since the start of the year. Citi expects India to post a balance-of-payments surplus of about $53 billion in the fiscal year ending March 2027, down from about $60 billion the previous year. The key challenge will come after the incentive measures expire on 31 August, because the balance-of-payments trajectory will then depend more on fundamentals, especially oil prices, foreign direct investment flows, and foreign portfolio investment.
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Nomura Holdings, Inc.
Jefferies Financial Group Inc
Citigroup Inc.