$127 billion deposits raise new rupee risk as banks face future FX interest bills

With over $127 billion raised in overseas FX deposits since June, Indian banks are now confronting a risky situation regarding unhedged future interest payments. This creates a likelihood for heightened dollar demand, posing a threat to the rupee's stability. While many foreign banks have taken precautionary measures, Indian lenders have not. If the rupee faces renewed weakness, it could spark a frantic quest for dollars amid rising exchange rates.