The lines and the proportions

The Reserve Bank of India reported $40,816 million mobilised through 31 July under the swap facility it announced on 5 June and opened on 8 June. Of that, $36,725 million came through FCNR(B) foreign-currency deposits opened by non-residents. Overseas foreign currency borrowings reached $2,575 million and external commercial borrowings $1,516 million. In a three-legged arrangement, almost all of the weight has landed on one leg.[1]

It is worth following how the circuit closes. An authorised dealer bank takes a foreign-currency deposit from a non-resident, and the deposit sits as the bank's liability. When the bank swaps that currency with the central bank, the exchange-rate position leaves its own balance sheet for the central bank's, and rupee liquidity appears domestically in return. The facility stays open until 30 September for FCNR(B) deposits and until 31 December for the other two legs. The figure therefore measures a public-sector currency commitment as much as it measures a capital inflow.[1]

Which leg filled

The proportion between the legs is not an accident. The deposit leg carries $36,725 million while the two borrowing legs stop at $2,575 million and $1,516 million. One reading is that volume appears where the central bank absorbs the hedging cost and does not appear where it does not. That is a response to a price signal, not a durable change in how savers view India. The competing account deserves weight too: demand for external commercial borrowing may be weak for reasons unrelated to the swap terms — the state of investment programmes, global borrowing costs. On that reading the ratio reflects sluggish real investment rather than the design of the facility.[1]

One date separates the two readings: 30 September, when the window on the deposit leg closes. If this money is a response to cheap hedging, the FCNR(B) inflow should slow markedly once the date passes; if it reflects a real shift in non-resident preference, it should not. The data to watch are the central bank's subsequent reports under the same heading, and the test is the monthly increase after September measured against the June-July pace.[1]