Banks can offer loans for FCNR (B), rebook deposits, RBI clarifies

RBI clarified that banks can extend loans against FCNR(B) deposits, issue stand-by letters of credit to overseas lenders, and cancel/rebook deposits with residual maturity under three years under its concessional swap facility. The facility, open until October 16 for deposits mobilized by September 30, covers only principal amounts and not interest, with RBI absorbing currency hedging costs enabling banks to offer 6% to 7.1% on major foreign currencies. RBI also launched a separate swap facility for external commercial borrowings (ECBs) by banks and PSEs at a fixed 1.5% per annum, applicable to ECBs with average maturity of three years or more up to a maximum of five years.