FM to meet PSB chiefs, review foreign currency deposit drive, Pg11

Key Highlights:

• Finance Minister Nirmala Sitharaman will review the progress of a foreign currency deposit mobilization campaign with chiefs of Public Sector Banks (PSBs) and financial institutions.
• The campaign aims to attract foreign currency deposits from Non-Resident Indians (NRIs), Overseas Citizens of India (OCIs), and Persons of Indian Origin (PIOs).
• The Reserve Bank of India (RBI) recently withdrew the interest rate ceiling on fresh Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits of 3-5 years' maturity until September 30.
• This move by the RBI came after FCNR(B) deposit inflows significantly weakened, dropping to $946 million in FY26 from $7.1 billion in FY25.

Detailed Insights:

• The meeting on July 13 will focus on the mobilization of FCNR(B) deposits, overseas foreign currency bonds, and External Commercial Borrowings (ECBs).
• The withdrawal of the interest rate ceiling on FCNR(B) deposits is a measure to make these deposits more attractive to overseas Indians.
• FCNR(B) deposits allow overseas Indians to hold their savings in designated foreign currencies, protecting them from rupee depreciation and offering tax-exempt interest in India.
• The RBI's action is intended to boost foreign capital inflows and strengthen India's external sector stability.
• Public Sector Banks (PSBs) are banks where the Government of India holds a majority stake, playing a crucial role in implementing government financial policies.

Key Concepts Involved:

• Non-Resident Indian (NRI): An Indian citizen residing outside India for more than 182 days in a financial year for employment, business, or other purposes.
• Overseas Citizen of India (OCI): A foreign national of Indian origin who is granted permanent residency in India, allowing them to live and work indefinitely, but without political rights.
• Person of Indian Origin (PIO): A foreign citizen (excluding certain countries) who or whose ancestors were Indian nationals, a scheme now largely merged with OCI.
• Foreign Currency Non-Resident (Bank) [FCNR(B)] Deposits: Fixed-term deposits in foreign currencies offered by Indian banks to NRIs, OCIs, and PIOs, where the foreign exchange risk is borne by the bank.
• External Commercial Borrowings (ECBs): Commercial loans raised by eligible Indian entities from recognized non-resident lenders in foreign currency or Indian rupees, regulated by the RBI under FEMA.