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      Question

      Foreign currency exchange risk in case of Non Resident

      (Banks) scheme (FCNB) is borne by?
      A The depositor Correct Answer Incorrect Answer
      B The bank Correct Answer Incorrect Answer
      C RBI Correct Answer Incorrect Answer
      D Government of India Correct Answer Incorrect Answer
      E There is no currency risk Correct Answer Incorrect Answer

      Solution

      Foreign currency non-resident deposits, usually abbreviated as FCNR(B) – the B stands for banks, are term deposits that non-resident Indians (NRIs) can open with banks in India. These deposits are denominated in foreign currencies permitted by the Reserve Bank of India. In Sept 2013, RBI introduced the three-month swap window for FCNR(B) deposits with a term for three years or more. Under this swap window RBI allowed banks to exchange (or swap) their FCNR(B) deposits with it by paying an interest at a fixed rate of 3.5%. During the period, the interest rate ceiling on these deposits was also increased to LIBOR/Swap plus 400 basis points.

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