Foreign currency exchange risk in case of Non Resident

Solution

Foreign currency non-resident deposits, usually abbreviated as FCNR(B) – the B stands for banks, are term deposits that non-resident Indians (NRIs) can open with banks in India. These deposits are denominated in foreign currencies permitted by the Reserve Bank of India. In Sept 2013, RBI introduced the three-month swap window for FCNR(B) deposits with a term for three years or more. Under this swap window RBI allowed banks to exchange (or swap) their FCNR(B) deposits with it by paying an interest at a fixed rate of 3.5%. During the period, the interest rate ceiling on these deposits was also increased to LIBOR/Swap plus 400 basis points.