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Mumbai , Sept. 25

THE Reserve Bank of India is understood to have advised banks that have offshore units, against accumulating large foreign currency funds which they may not be able to deploy profitably.

This is because lending by OBUs to borrowers in the domestic tariff area is restricted and the cost of funds would work out to be higher for banks to deploy these funds to the units within the SEZ.

According to banking sources, RBI has cautioned banks against fixing aggressively high interest rates on their foreign currency deposits in their OBUs that are based in Mumbai. Bankers contend that if they cannot aggressively mobilise dollar deposits through the local OBUs, it does not augur well for most banks which are starved for dollar funds and have been eagerly awaiting the RIB redemptions as an opportunity to harness the greenbacks.

A senior banker with a public sector bank confided, "If this is true, then the apprehensions of a liquidity crunch will once again be fanned. This truly means RBI wants to plug the dollar inflows into the country."

"There was some hope that if higher interest rates could be offered in these OBUs, we could once again attract dollar deposits in a big way. As it is, most banks are facing a dollar shortage and have to turn back most customers who want to avail of dollar loans," he said.

The recent clampdown on NRE rates by RBI had itself come as a dampener to SBI, which had to reset interest rates on its NRE deposits, after conducting a series of road shows, to attract investment on its new special deposits schemes.

This latest development has thrown a spanner in the plans of banks such as SBI, ICICI Bank etc, which were drawing up special deposit products to attract some of the $5.5 billion of RIBs that mature on October 1.

One of the advantages that banks saw in collecting deposits at an OBU was that they would be exempt from the RBI's CRR and SLR requirements. Currently SBI, ICICI and Union Bank are among the ones to have set up OBUs in Mumbai, even though Bank of Baroda and Bank of India also have received licences. Punjab National Bank is also gearing to set up its OBU at SEEPZ, shortly.

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