ICICI Bank takes in $17.88 billion under the RBI's FCNR window

ICICI Bank said on 2 September that it had mobilised about $17.88 billion, or roughly Rs 1.70 lakh crore, in Foreign Currency Non-Resident (Bank) deposits under the Reserve Bank of India's special swap facility through 31 August. The figures are provisional and unaudited. The rupee conversions use the 31 August rate.

International branches and subsidiaries have lent about $9 billion against those deposits. The bank has also issued about $3.63 billion of guarantees, described in the filing as standby letters of credit, so that other banks can lend against the same money. Separately, ICICI issued about $3.55 billion of dollar bonds in July and August.

31 August was the cut-off for fresh FCNR(B) deposits that qualify for the concessional swap. Banks can still swap deposits already raised by that date until 11 September.

Why the window exists

The RBI launched the package in June as the rupee approached record lows and the Iran war disrupted energy and capital flows. The tools included concessional dollar-rupee swaps for FCNR(B) deposits with three-to-five-year tenors, and permission for banks to lend against those deposits, in some cases at high leverage. Officials pointed to a diaspora of about 35 million people as the source of the dollars.

Lenders advertised guaranteed returns above 7.1 percent on dollar deposits. By late August the FCNR slice of the facility had drawn more than $65 billion. The broader facility, which also covers external commercial borrowing and overseas foreign-currency borrowing, was near $73 billion. The RBI's forward book hit a record $136.7 billion in July.

This is the same design used in 2013 during the taper tantrum, when the window raised about $26 billion. Market talk this summer was $45 billion to $55 billion, with some bankers floating $80 billion. Outstanding FCNR(B) deposits had already jumped from $32.56 billion on 5 June to $60.55 billion by 30 July.

Who collected the money early

Data placed in Parliament for the period from 5 June to 30 July showed HSBC's Indian operations ahead at $6.14 billion, State Bank of India at $4.12 billion and ICICI at $3.7 billion. HDFC Bank and Axis Bank were near $1.5 billion each. ICICI's jump to $17.88 billion by 31 August means August was the month the private bank filled the book.

The dollars help the rupee and the RBI's buffers. They also create a future outflow. Three to five years from now the deposits mature and the swaps unwind. If the war premium on oil is still there, the exit will land in a market that has less spare hard currency, not more. For this week the filing is a scoreboard. One private bank took in $17.88 billion because the central bank paid it to do so.