RBI News: The RBI has launched a concessional swap facility, making it easier for government financial institutions to borrow from abroad.

RBI introduces concessional swap facility

RBI News: The Reserve Bank of India (RBI) has launched a new facility that could provide some relief to government financial institutions. This new facility, called concessional forex swaps, will make it easier and cheaper for government financial institutions to borrow from abroad. Rating agency S&P Global Ratings reported this in a report on Thursday.

In order to attract foreign capital to India, the RBI launched a special forex swap facility last month
. Under this facility, if public sector (PSU) companies raise external commercial borrowings (ECBs) from abroad by September 30th, the RBI will provide them with a dollar-rupee swap facility for a period of three to five years at a premium of just 1.5% per annum.

Speaking on this matter, Geeta Chugh, an analyst at S&P Ratings, told Moneycontrol that encouraging government financial institutions to borrow from abroad will bring foreign currency into India. This will strengthen the country's foreign exchange reserves, support the rupee, and further accelerate the economy by reaching various sectors.

What's in the report?
According to the S&P report, the biggest advantage of this facility is that it eliminates the risk of foreign currency fluctuations at a significantly lower cost. This means that government financial institutions will be able to borrow less expensively from abroad without taking on significant risk. This will reduce their funding costs and encourage them to raise more foreign debt.