Indian Banks Scramble for Dollars Before RBI Swap Window Closes

Indian banks are in a rush to raise dollars before the RBI's FX swap window closes on August 31st. The facility, which helped lenders hedge foreign-currency exposure linked to FCNR deposits, has been moved up from its original date, prompting banks to pull their funding plans into a tight calendar.

Citi strategist Akshay Naik told Reuters that the next six to eight days will be 'one of the busiest windows' for dollar bonds and loans. Banks are expected to raise at least $5 billion in the next two weeks, on top of the $5.93 billion raised through August 11th.

However, the immediate result is a short-term bulge of US dollar supply, which could pressure Indian bank USD pricing. Once the swap window closes, banks will have to pay full FX hedging costs without the support, leading to a potential drop-off in supply and uneven pricing across Indian bank US dollar debt.