Foreign banks are pushing to raise billions of dollars from expatriate Indians in response to New Delhi’s drive to defend its weak currency, which could mean the government can avoid the need for a sovereign bond or state-backed deposit scheme to attract inflows.
The foreign banks are offering upfront financing for wealthy non-resident Indians (NRIs) to set up dollar deposits in India following various central bank incentives, including cheap dollar/rupee swap rates, private banking sources told Reuters.
This would resurrect a practice which proved successful in drawing in dollars from non-resident Indians (NRIs) in 2000, when the rupee was also under pressure. The sources said banks could raise about $10 billion or more.
“It’s a disguised NRI bond because you are basically getting in money locked in,” said Rajeev Malik, senior economist at CLSA Singapore. One of the things unique about the scheme was the leverage being provided to non-resident Indians, he said. The other was the central bank’s offer to swap the dollars for rupees cheaply.
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