The Reserve Bank of India (RBI) has prematurely concluded its special foreign exchange (forex) swap facility for Foreign Currency Non-Resident (Bank), or FCNR(B), deposits. This decision comes after the scheme successfully drew $52.3 billion in foreign exchange inflows, significantly contributing to India's financial stability.
Early Closure for FCNR(B) Deposits
The central bank announced that the facility for FCNR(B) deposits will now only be open for funds mobilized until August 31, 2026. Banks can, however, continue to avail swaps against these deposits from the RBI until September 11, 2026. This brings forward the original closure timeline for this component of the broader USD-INR forex swap facility.
Strong Inflows and Economic Impact
The RBI characterized the response to the facility, launched on June 8, 2026, as highly encouraging, prompting the early closure. These measures were initially designed to attract foreign currency from non-resident Indians and incentivize banks and public sector undertakings to secure dollar funding from abroad.
By August 13, authorized dealer banks reported that the three channels combined—FCNR(B) deposits, External Commercial Borrowings (ECBs), and Overseas Foreign Currency Borrowings (OFCBs)—had generated total forex inflows of $56.846 billion. FCNR(B) deposits constituted the majority of this sum, bringing in $52.3 billion. The remaining inflows came from OFCBs ($2.805 billion) and ECBs ($1.741 billion).
ECB and OFCB Windows Remain Open
Conversely, the schemes for External Commercial Borrowings (ECBs) and Overseas Foreign Currency Borrowings (OFCBs) will remain operational until their original closure date of December 31, 2026, as previously scheduled.
Banking System Benefits and Rupee Support
The surge in foreign currency inflows has coincided with a notable increase in India's banking system deposits. RBI data, as reported by Reuters, indicates that bank deposits grew by a cumulative ₹11 trillion (approximately $115.25 billion) over the three fortnights leading up to July 31. Total bank deposits hit a record ₹269.4 trillion, with many market observers linking a significant portion of this rise to the conversion of dollar inflows from the FCNR(B) scheme into rupees.
The robust uptake of the FCNR(B) facility had previously led financial firm Jefferies to project total inflows could reach $80-100 billion. Jefferies noted that substantial FCNR(B) inflows were beneficial for India’s capital flows and could bolster the rupee, which had experienced a period of depreciation, touching 96.96 against the US dollar in May before trading at 95.17 at the time of their report.
This FCNR(B) facility aligns with India's past strategies to attract foreign currency deposits and stabilize the rupee, mirroring similar schemes implemented in 1993 and 2013.