India’s Overseas Deposit Inflows Cross $100 Billion, Boosting Foreign Reserves

Inflows under the Reserve Bank of India’s special overseas deposit facility have crossed the $100 billion threshold, the Financial Express reported on Wednesday, citing unidentified officials.

This milestone represents a substantial increase from the last official figure of $65.39 billion reported by the central bank for foreign currency non-resident deposits. It also surpasses the previous estimate of approximately $80 billion provided by RBI Governor Sanjay Malhotra.

Last month, the monetary authority unexpectedly advanced the closure of the deposit window to August 31 from the end of September. Governor Malhotra cited stronger-than-expected inflows under the programme as the reason for the early shutdown.

The large-scale dollar influx has driven the central bank’s reserves to a record high of $729.3 billion. According to reports, this development has helped avert what could have been an unprecedented third consecutive year of a deficit in India’s broadest measure of money flowing in and out of the economy.

Additionally, the buildup in reserves has provided the central bank with increased capacity to intervene in the currency market. This intervention aims to support the rupee, which continues to experience pressure stemming from elevated oil prices.

"The surge in overseas deposit inflows past the $100 billion mark is a significant development for India's macroeconomic stability. By pushing foreign reserves to a record $729.3 billion, this capital influx provides the central bank with essential leverage to manage currency volatility and support the rupee against external pressures like elevated oil prices. For businesses and entrepreneurs operating in India, a stable currency and robust foreign reserves create a more predictable economic environment for long-term planning and investment." — Dr. Shishir Gupta, Founder & CEO, StartupLanes