MUMBAI, Apr 16: The forex swap window opened by
the central bank can potentially ease the interest costs for
the industry and can potentially help top 500 borrowers of
foreign funds save up to Rs 7,000 crore as the issuances
increase, says a report.
The Reserve Bank had on March 26 conducted the first
of forex swap auctions raising USD 5 billion promising to pay
back in rupees in return, that softened the rupee-USD forward
rates. It has announced another similar issue on April 23.
“The recent softening of the rupee-US dollar forward
rates, if sustained at least in the foreseeable future, is
likely to provide a fillip to borrowers that plan to raise
foreign currency-denominated capital,” India Ratings said in a
report Tuesday.
It said the first round of the three-year swap auction
along with a change in the global monetary policy conditions,
has moderated the three-year cross-currency swap rates by 0.30
percent on April 15 from the January 2 levels.
In the same period, the rupee-dollar forward premia
moderated by 0.71 percent, driven by a marked improvement in
the dollar liquidity conditions in the domestic market, the
report noted.
The agency estimates the interest outgo of the top-500
debt-heavy corporates can cumulatively come down by Rs 4,000-
7,000 crore, assuming a 0.50-0.75 percent reduction in the
cost of forex borrowings and a 0.5-2 per cent rise in the
share of forex borrowings in their outstanding debt.
The RBI swap windows will make available additional
deposits of about Rs 69,000 crore to the banking sector, it
said, adding however, the swap is unlikely to materially
change the aggregate banking system liquidity shortfall.
On the lack of transmission of RBI’s policy moves into
lending rates for borrowers, it said a weak accretion of
deposits has hurt and it is imperative to create substantial
quantum of fresh deposits in the system.
For a meaningful traction in deposit growth, both
endogenous and exogenous factors such as flow of foreign
capital should continue to contribute in a sustainable manner
over the near to medium term, it said.
The report pegs non-food credit growth will clock Rs
11.68 lakh crore in FY20 and the deposit shortfall will be Rs
2.79 lakh crore even after proceeds from the swap window and
an increase in credit-deposit ratio. (PTI)
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