ICICI Bank books $17.88 billion from the RBI's summer dollar window

ICICI Bank had taken in $17.88 billion of FCNR(B) deposits under the Reserve Bank of India's special dollar-rupee swap by 31 August, the lender told the exchange. About $9 billion of that pool had already gone out as loans from international branches and subsidiaries. Standby letters of credit worth $3.63 billion supported further loans at other banks against the same deposits. Direct loans and SBLC-backed loans together come to $12.63 billion, more than 70 percent of the money raised.

The bank also sold about $3.55 billion of dollar bonds in July and August. System-wide, FCNR(B) deposits under the window stood at $127.23 billion on 31 August in one later market tally, with total foreign-currency inflows through the facility, including overseas borrowings and external commercial loans, at $136.38 billion. An earlier RBI snapshot on 21 August had put the three routes at $72.85 billion, of which FCNR(B) was $65.4 billion. ICICI's book at that date was about a quarter of the FCNR(B) total.

The swap opened on 8 June. The FCNR(B) leg closed on 31 August. ECB and overseas foreign-currency borrowing can continue until 31 December. The design is simple. A bank takes a dollar deposit from a non-resident and swaps it with the RBI on concessional terms, which removes most of the currency risk that would otherwise sit on the bank's book. The rupee had been under pressure. The RBI's forward book rose to $136.7 billion in July after the inflows began.

The useful question now is deployment. Dollar deposits that sit idle still have to be paid back in dollars. ICICI has already placed $9 billion with borrowers through its foreign network and wrapped another $3.63 billion as guarantees. That is a higher use rate than a parking exercise. It also creates a future rollover. When the deposits mature, the bank must refinance them or repay them. If the special swap is not renewed, the next dollar will cost more.

For the RBI the window did what it was built to do: it pulled a large stock of foreign currency into Indian banks in one summer. For ICICI the test is whether the $17.88 billion becomes earning assets that still look sound when the concession ends. A later market note on 8 September asked the same question in public: can banks put the RBI's dollar funds to work without storing up a repayment problem.

FCNR(B) deposits are not free money. They are term liabilities in foreign currency, often from non-resident Indians who can move the cash again when the rate looks better elsewhere. ICICI's 70 percent deployment rate is the part of the filing that other banks will compare. The 31 August stock-take is done. The next figures that matter are the maturity ladder and the share of those loans that still perform when the cheap hedge is gone.