FCNR (B) to pay for NDF.

"The central bank's special measures to attract foreign exchange have brought in $40.81 billion by July 31, driven largely by foreign currency non-resident (bank) or FCNR (B) deposits, showed data released by the Reserve Bank of India (RBI)." "Banks can swap these deposits with the RBI under a zero-cost hedging facility available until 30 September." ET. That means that banks will be able to buy back this foreign money from the RBI at today's exchange rates when the bonds are redeemed at the end of 3-5 years. The RBI will bear the cost of any depreciation of the rupee. Protects banks but punishes taxpayers. "A surge in dollar demand from Indian lenders racing to boost the leverage on foreign currency deposits they are offering to overseas citizens is firing up its dollar bond and loan markets, with global banks rushing to capture the business." "Banks are giving interest rates north of 7% for those dollars which would end on 30 September." ET. Foreign banks are lending money to non-resident Indians (NRIs) to invest in these bonds. Yield on 5-year US Treasury is at 4.34% and on 5-year AAA Corporate bonds is at 4.44%. Fidelity. Foreign banks will profit from interest on their loans while NRIs will profit from the difference between their borrowing cost and the huge interest from Indian banks. The hapless taxpayer is losing out. Meanwhile, "Bloomberg Index Services...deferred the inclusion of Indian government bonds in its flagship Global Aggregate Index." "Inclusion in the index typically leads to increased foreign flows into the debt market and helps boost the country's currency - the Indian rupee has depreciated 5.5% so far this year." In June, India scrapped 12.5% long-term (bonds held for more than 12 months) capital gains tax and a 20% withholding tax on interest earned from government bonds to tempt foreign investors. Reuters. "Market participants are closely watching foreign portfolio investor (FPI) activity in fully accessible route (FAR) securities as some investors, who had bought them in anticipation of their inclusion in the Bloomberg global bond gauge, are expected to lighten positions accumulated over the last two months. " The daily average flow from FPI has dropped to Rs 3 billion in July from Rs 30 billion in June as markets are pricing in 1-2 rate hikes from the US Federal Reserve. ET. "India's remittance boom has powered through global crises, geopolitical tensions and economic slowdowns, helping make the country the world's largest recipient of money sent home by overseas citizens since 2008." "According to the Finance Ministry...gross remittance inflows rose to a record $155.1 billion in FY 26 from $135.4 billion in FY 25, an increase of 14.5%." However, "tighter visa rules, higher salary thresholds and restrictions on temporary migration could slow the pipeline of new migrants, making future growth uneven." ET. In addition to this high interest borrowing from NRIs, "The RBI's net foreign exchange forward book market shrank slightly to $103.3 billion in June, as a reduction of near-tenor dollar liabilities outweighed a rise in longer tenor ones reflecting absorption of dollar inflows." Reuters. The RBI's short-term borrowing in the non-deliverable forward market is to shore up its foreign exchange reserves to protect the rupee from steep falls. The 3-5 year FCNR (B) bonds is just kicking the can down the road (BBC). India's total foreign debt was $762.80 billion in the first quarter of 2026, slightly down from $765.50 in the fourth quarter of 2025. Trading Economics. India's foreign exchange reserves were $682.35 billion on 31 July 2026. investing. com. Hope we don't have to borrow from the International Monetary Fund (IMF) like Pakistan  (imf.org)." Imagine India and Pakistan standing with tin cans outside the IMF building in Washington. Brothers in alms.