THIS AFTERNOON: Indian, UAE regulators discuss FX deposit friction

Good morning, friends, and happy FRIDAY. India has directed shippers to stop deploying its seafarers on Hormuz vessels after recent attacks killed and injured crew members.

Saudi Arabia is clawing back market share in India’s oil basket, with July shipments jumping 152% m-o-m. But Russia is holding firm, accounting for more than half of all Indian crude imports while Gulf producers remain well short of their pre-war share.

Plus: SBI Funds Management’s IPO became India’s fourth-most-subscribed issue on record, attracting USD 31 bn in bids.

Indian, Emirati regulators talk FX deposit friction

The Reserve Bank of India and Central Bank of the UAE met in Dubai last week to iron out friction over India’s moves to pull USD deposits out of non-resident Indians in the UAE, Bloomberg reports, citing people familiar with the private talks. The UAE side flagged concern that freezone banks would prioritize India’s fundraising over their local customer base and has separately warned some smaller banks against extending aggressive leverage to Indian lenders, wary of outsized capital outflows.

Also on the table: Easing the due-diligence timeline that UAE-based banks run on wealthy customers, the people said.

REMEMBER- CBUAE recently tightened rep-office rules for foreign banks, restricting the onboarding support Indian lenders usually lean on, including documentation support, business facilitation, and cross-selling.

Why it matters: The Gulf is expected to supply more than 70% of India’s targeted foreign-currency deposit inflows under the Reserve Bank of India’s rate-subsidized scheme.

Don’t deploy Indians to Hormuz

India has directed shippers to avoid deploying Indian seafarers on vessels passing through the Strait of Hormuz until further notice, the Directorate General of Shipping said on X. The move follows recent attacks on Gulf vessels that killed and injured Indian crew members.

What the advisory says: Companies should avoid placing Indian seafarers on vessels transiting the Strait of Hormuz, although ships and cargo can continue using the route. Vessel masters in the Arabian Gulf, Hormuz, and adjoining waters must also monitor warnings and follow ship security plans under the International Ship and Port Facility Security Code.

Why now? The Directorate General cited recent attacks on the Mombasa B, Al Bahyah, GFS Galaxy, MT Wedyan, and Al Rekayyat, saying the incidents had raised risks for seafarers and merchant vessels. The strikes on UAE-linked tankers Mombasa B and Al Bahyah killed one Indian seafarer and injured six other Indian crew members.

Why it matters: India is the world’s second-largest supplier of seafarers, with more than 310k Indians working on merchant ships. Keeping Indian crew off Hormuz routes could add to staffing pressure for shipowners already facing higher security and ins. costs.

Fuel export taxes hiked

India has sharply raised export taxes on diesel and aviation turbine fuel (ATF) for the second half of July – reversing course within two weeks – as the collapse of the US-Iran interim peace deal keeps refined-energy markets on edge.

What changed: Effective Thursday, the diesel export duty rose by 82% to INR 15.5/litre while the ATF levy increased by about 93% to INR 14.5/litre, as per a Finance Ministry notification, cited by Bloomberg. The export duty on petrol lowers by 37.5% to INR 2.5/litre following a fortnight review of international crude and refined-product prices.

IN CONTEXT- India cut these same diesel and ATF levies on 1 July, when the Gulf supply crunch appeared to be easing and Hormuz-transit risk had calmed.

The exposure: India imports over 85% of its crude but is also a swing exporter of refined products — averaging ~1 mn bbl / d in shipments this year, the newswire’s report suggests. Diesel is 40% of that export volume, petrol 26%, jet fuel 9%.

Why it matters: The higher diesel and ATF levies could reduce the incentive for Indian refiners to send more fuel overseas at a time when global product markets are tight. India’s July refined-product exports were expected to rise 20% y-o-y, with shipments headed for their highest level since September as refiners looked to leverage stronger margins in the US and Europe.

India’s external account remains under strain

India’s external account remained under pressure in May, with stronger remittances cushioning — but not reversing — persistent capital outflows. The country’s balance of payments (BoP) stayed in a deficit for a second straight month, although the shortfall narrowed, RBI data shows.

By the numbers: The overall BoP deficit narrowed to USD 4.4 bn in May from USD 6.6 bn in April. However, the current account swung to a USD 2 bn deficit (from a USD 700 mn surplus a year earlier) and the capital account recorded a USD 2.4 bn outflow — reversing last year’s USD 3.7 bn inflow as foreign portfolio investors stayed on the sidelines.

Why it matters: India’s external accounts are being propped up by its diaspora. Net transfers — largely remittances — rose 29.5% y-o-y to USD 13.6 bn, helping cushion the impact of persistent capital outflows. That’s especially significant for the Gulf, which accounts for roughly 38% of India’s remittance inflows. Those transfers remain a key source of foreign exchange as higher oil prices and regional tensions threaten to push up India’s import bill.

Data point

20.5% — that’s India’s share of international online searches for Dubai property over the past three months, making it the largest overseas source of buyer interest, according to Dubai-based real estate agency Fam Properties. The UK followed with 13.2% of searches, ahead of Egypt (12.6%), the US (8.9%), and Pakistan (6.9%). While search activity doesn’t always translate into sales, it is widely seen as an early indicator of demand.

IN CONTEXT- The data suggests Indian appetite for Dubai real estate is holding up after the recent bout of war-driven jitters that weighed on the emirate's property market. Indians remain the largest overseas buyer base.

PSAs

Indian nationals in Kuwait and UAE will face disruptions in consular services, as a court set aside the Indian government’s tender for outsourcing passport, visa and consular services in the UAE, Kuwait, Australia, and Singapore. The court has directed the government to invite fresh bids after finding flaws in the procurement process.

Why it matters: The ruling affects one of India’s largest overseas consular outsourcing exercises, impacting countries such as Kuwait and the UAE, which are home to around 5 mn Indian nationals. While existing services will continue temporarily, delays in passport renewals, visas and document attestations may disrupt corporate mobility, hiring and cross-border business operations.

What’s next: India’s External Affairs Ministry has a month to issue fresh tenders. The rebidding process is likely to delay the appointment of a permanent service provider — particularly in the UAE where previous contracts expired on 30 June.

The big story abroad

It’s quiet in the business press, with the Financial Times’ front page story looking at the US chip sell-off amid a “deleveraging” phase and broader market volatility, and Bloomberg taking note of SpaceX’s scrapped Starship rocket mission, which had to be canceled due to issues with the engine. SpaceX shares extended their losses on Blue Ocean after ending the trading day down yesterday, and after breaking below their USD 135 IPO price for the first time on Wednesday.

Meanwhile, the Guardian says the recovery plans and ambitious masterplan for Gaza put forward by President Donald Trump’s Board of Peace seem to have shrunk to a “tiny pilot scheme” in Rafah, south of Gaza, as Israel continues to violate the US-brokered ceasefire and bar the NCAG, a body of 13 Palestinian professionals and technocrats convened by the BoP earlier this year, from entering Gaza.

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