RBI Governor Malhotra, officials met banking heads; FCNR(B) deposit scheme mobilisation discussed

The Reserve Bank of India (RBI), on Tuesday, held half-yearly meetings with the managing directors and CEOs of public sector banks and select private sector banks. Among the key points of discussion was how to boost inflows into the special Foreign Currency Non-Resident [FCNR(B)] deposit schemes announced by several banks from June onwards.

As these schemes are open till the end of September, the meeting reviewed the current status and the trends emerging from them.

In June, leading lenders including State Bank of India, HDFC Bank, Bank of Baroda, YES Bank and AU Small Finance Bank announced higher interest rates on FCNR(B) deposits after the RBI introduced concessional swap facilities to incentivise such deposits, with the aim of boosting capital inflows and strengthening India’s foreign exchange reserves.

However, in recent weeks, overseas interest rates have risen amid persistent inflationary concerns and continued geopolitical tensions stemming from the West Asia conflict. To make the schemes more attractive, the RBI decided to absorb the entire hedging cost of around 280–300 basis points per annum. This enables banks to offer higher deposit rates, estimated in the range of 5.5% to 7.1% on dollar deposits, compared with the pre-announcement range of 2% to 4%.

A day earlier, Finance Minister Nirmala Sitharaman reviewed the progress of the schemes, during which several lenders said demand has been particularly strong from NRIs based in Singapore, Hong Kong, West Asia, the UK and the US.

Tuesday’s meetings were chaired by RBI Governor Sanjay Malhotra and attended by Deputy Governors Swaminathan J., Dr Poonam Gupta, S.C. Murmu and Rohit Jain, along with executive directors in charge of supervision, regulation, enforcement, consumer education and protection, and financial inclusion.

Governor Malhotra suggested banks “leverage advanced technologies, including Artificial Intelligence (AI), to expand their reach, improve operational efficiency, reduce costs and enhance customer experience, while ensuring robust cybersecurity, strong internal controls and safeguards against fraud and data misuse,” the RBI said in a press release.

Malhotra also “stressed the need to cultivate a passion for excellence in customer service by placing customers at the heart of banking operations,” the statement said.

Other issues discussed included the Central KYC Records Registry (CKYCR), early detection of Fake Indian Currency Notes (FICN), adoption and popularisation of MuleHunter, Central Bank Digital Currency (CBDC), Unified Lending Interface (ULI), Account Aggregator, Forex Retail and Retail Direct.

Malhotra also acknowledged that the banking sector has witnessed broad-based growth and urged banks to continue meeting the needs of all segments of the economy with renewed vigour and prudence.