New Delhi, June 11 -- India's foreign exchange position has not looked vulnerable lately. This found emphasis in the Reserve Bank of India's (RBI) monetary policy statement last week, which noted that its forex reserves covered around 11 months of Indian imports.

Yet, it opened a new window to attract foreign currency non-resident (FCNR) deposits. RBI said it would bear the hedging cost on these FCNR (B) deposits that banks raise. This move to attract foreign currency echoes what was done during the taper tantrum of 2013, but its zero swap cost sets it apart.

Let us look at the terms laid down.

For the period up to 30 September, banks can raise FCNR (B) deposits for tenures of 3 to 5 years. There will be no requirement to carve out res...