Why in news
- International banking units operating within GIFT-IFSC sanctioned over $54 billion using RBI's FCNR(B) swap facility mechanisms.
What is the FCNR(B) Swap Facility?
- **Foreign Currency Non-Resident (Bank)** deposits allow non-resident Indians to maintain fixed deposit accounts in designated foreign currencies.
- RBI provides liquidity swap windows allowing banks to swap convertibility risks and mobilise foreign currency resources into domestic or offshore banking units.
Key structural aspects
- International Banking Units (IBUs) in GIFT City leverage foreign currency deposits to grant external commercial borrowings and cross-border trade credit.
- Helps insulate domestic commercial banks from currency volatility while providing low-cost foreign exchange loans to Indian corporate borrowers.
Why it matters
- Deepens dollar liquidity within India's premier **International Financial Services Centre (IFSC)**.
- Reduces Indian corporate dependence on foreign financial centres like Singapore or London for foreign currency credit.
Key terms
FCNR(B) Account
A foreign currency denominated term-deposit account maintained by NRIs where principal and interest are fully repatriable.
International Banking Unit
A branch of a commercial bank set up inside an IFSC operating like an overseas banking entity.
Prelims facts
- IFSCA is a statutory unified regulator headquartered at GIFT City, Gandhinagar.
Mains discussion
- Role of GIFT-IFSC in globalizing Indian financial services and reducing offshore credit costs.
Source: Business Standard
Same topic · past papers
UPSC has asked this before
These previous-year questions sit on the same topic. Open one to practise the earlier ask.
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