Putting all the speculations to rest, India’s Apex bank has clarified that concessional swap facility will not be extended beyond November 30, however providing some breathing space to the banks that are currently negotiating with global lenders for overseas loans, it allowed banks to utilize the special window till December 31, provided if they have a firm commitment from international lenders before November 30.
It said that only banks which manage to secure loans from any international/multilateral financial institutions or for that matter receive a firm commitment in this regard on or before November 30, will be allowed to enter into a forward-forward swap under the first leg of which the bank will sell forward the contracted amount of forex corresponding to the loan amount for delivery up to December 31.
Under the swap facility, banks were permitted to borrow from international banks/multilateral agencies up to 100% of their core capital and swap the amount with RBI at a concessional rate of 3.5%.
RBI also been allowed the extension as it feels that some of banks may not be in a position to draw the loan and deliver the same to RBI as part of the concessional swap within mandated ‘November 30’.
However, the central bank also clarified that if a bank is not in a position to deliver the contracted amount of foreign currency on the contracted date, it would have to pay the difference between concessional swap rate contracted and the market swap rate plus 1%.
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