India’s Central Bank Program Brings in Billions - India Real Time - WSJ

India’s Central Bank Program Brings in Billions - India Real Time - WSJ:

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The RBI has to shell out around $250 million of its own money for every $10 billion raised through the program.

Indians living abroad are putting up billions of their hard-earned dollars to help bring confidence back to India and its rupee.

The Reserve Bank of India has been trying to increase the country’s foreign exchange reserves by making it cheaper for Indian banks to borrow abroad and helping them set up attractive deposit programs for the world-wide web of non-resident Indians.

In early September–not long after the rupee hit an all-time low against the dollar– the RBI said it would start subsidizing some of the cost of hedging against currency risk in foreign currency deposits and loans. The program has raised $10 billion since it was started in early September, according to an RBI announcement Wednesday.

Foreign exchange reserves are a rainy-day fund central banks use to bolster their currencies. When local currencies are sliding in times of stress, central banks dump their dollars and buy their own currencies.  Foreign reserves is a key parameter used to assess a country’s resilience against heavy capital outflows, such as those seen this summer after the U.S. Federal Reserve hinted it will end its easy-money policy."

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