Banks may mop up $5 bn from NRI fund swap facility: SBI Report
Mumbai: An SBI research report on Friday said banks are likely to net USD 5 billion by March, 2014 by availing RBI's special window facility to swap foreign currency non-resident (FCNR) dollar funds -- half of what experts from foreign brokerages have initially estimated.
Yesterday, analysts from global financial majors like Morgan Stanley and Bank of America-Merill Lynch had projected that lenders would be able to garner up to USD 10 billion through this route.
"This scheme may attract up to USD 5 billion if extended till March," Chief Economic Adviser at State Bank's economic research department Soumya Kanti Ghosh said in the report.
Describing the mover as "positive", Ghosh said the cost of the such money will 9.8 percent if the banks take this route.
"After adjusting for this and also netting out the carrying cost of CRR and SLR, the cost is exactly 9.8 percent," he said.
Commenting on the limited scope for mobilising deposits, the note says "historically, the highest monthly FCNR-B deposits gathering stands at USD 700 million, which roughly means our banks will be able to mobilise USD 2 billion by November and USD 5 billion by March."
"Additionally, we should also keep in mind that the country already has USD 15 billion in outstanding FCNR-B deposits, or one-third of the total NRI deposits," the report added.
In his maiden statement on assuming office, RBI Governor Raghuram Rajan made a slew of announcements to boost confidence of the battered markets, including this measure for helping the rupee, which has lost nearly 20 percent so far this fiscal, after hitting a low of 68.85 a week back.
"We will offer a window to banks to swap fresh FCNR-B dollar funds, mobilised for a minimum tenor of three years and over, at a fixed rate of 3.5 percent per annum," Rajan had announced.
Lauding the RBI move, a note from American brokerage Morgan Stanley had yesterday said banks could raise dollar deposits like they do in normal course and convert them into rupee deposits at 3.5 percent interest, which is well below the current hedging cost of 7 percent.
For the bank, the converted cost of the deposit will be at par with the domestic deposit rates, it said, adding banks can mop up USD 10 billion in the next three months through this route.