MUMBAI (Reuters) - The Reserve Bank of India said on Friday it will start subsidising the hedging costs of foreign currency swaps for banks offering deposits to overseas non-resident Indians (NRIs) starting from September 10 until November 30.
The RBI said it will buy dollars from the participating lenders at an agreed-upon rate, while providing the banks a forward swap at a fixed annual rate of 3.5 percent.
The RBI added the NRI deposits would need to have a minimum lock-in period of one-year and maturities of at least three years. In case of premature withdrawals, the swap rate offered by the central bank would be refixed at 400 basis points above the fixed 3.5 percent rate.
Banks will only be able to swap dollars with the RBI equal to the amount of greenbacks raised by the NRI deposits in the preceding weeks, according to the central bank statement.
For full statement, double click: http://link.reuters.com/nas82v
(Reporting by Suvashree Dey Choudhury; Editing by Rafael Nam)