Indian banks have requested the Reserve Bank of India to lift a restriction on guarantees. The goal is to revive a deposit scheme and attract more funds from the Indian diaspora.
Indian banks are seeking the removal of a guarantee restriction from the Reserve Bank of India. The change would allow them to revive a special deposit scheme aimed at foreign currency non-resident accounts. Officials believe this step could boost the supply of dollars in the country.
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Prime Minister Narendra Modi has urged citizens to reduce spending on gold and petroleum products amid falling foreign exchange reserves and rising import bills linked to the West Asia conflict.
India's Reserve Bank of India (RBI) has limited banks' net open positions in rupee foreign exchange dealings to $100 million per day, aiming to curb speculation and stabilize the currency. The measures respond to rupee depreciation driven by the Iran war, depleting reserves, rising crude oil prices, and USD-INR fluctuations.
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Foreign banks are reclassifying arbitrage deals affected by the Reserve Bank of India's clampdown on rupee speculation as hedges for capital inflows from their overseas parents. The strategy seeks to avoid the regulator's $100 million net open position limit. RBI officials may examine these changes based on timelines and documentation.
The Reserve Bank of India cautioned that an escalation in the West Asia conflict could derail the country's positive growth trajectory. The central bank assessed that the impact is likely to remain contained in the near term.
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The National Bank of Ethiopia announced changes on 25 May 2026 allowing banks to approve letters of credit without prior central bank approval for certain clients.
Reserve Bank of India Governor Sanjay Malhotra said the central bank is in “wait and watch mode” amid uncertainties from the West Asia war, with second-round effects being the real concern. In a speech at Princeton University on April 18, he stressed preventing supply shocks from embedding in price levels through inflation expectations rather than demand compression. He highlighted India’s significant exposure to the region.
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India is set to reapply for inclusion in major global bond indices after introducing tax exemptions for foreign investors. The country has also expanded its pool of long-dated securities to strengthen its appeal.