FNCR (B) deposits have been robust, but RBI has no plan to close special window early

The Reserve Bank of India had announced a special forex swap window in June as it looked to stabilise the rupee against the US dollar and shore up the reserves.

Since then, there have been robust inflows, particularly in foreign currency non-resident [FCNR (B)] deposits. However, the Reserve Bank will not close the window early, said Governor Sanjay Malhotra.

"We have got robust flows and we do hope to get good healthy flows going forward. As of now, there is no proposal under consideration to close the scheme prematurely." Malhotra told reporters on Wednesday.

The concessional swap scheme for fresh FCNR (B) deposits, overseas foreign currency borrowings (OFCB) and external commercial borrowing (ECB) had received inflows of $40.8 billion as of August 1, 2026.

Out of the total inflows, $36.72 billion has only been in FCNR (B) deposits, which is already exceeding the close to $26 billion that was raised via FCNR (B) deposits through a similar window back in 2013.

"We had even before these measures a very strong and comfortable external position. This further fortifies our external position," Malhotra noted.

The central bank has not set a target on how much flows it intends to garner till the window closes on September 30, he added.

Currency pressures 

The rupee had been under tremendous pressure this year, weakening to a life low of 96.90 earlier in May 2026 amid the US-Iran conflict in West Asia, which led to a surge in crude oil prices and in turn drove up India's import bill.

On Tuesday, August 4, 2026, the rupee closed at 95.38 against the dollar and further appreciated to around 95.13 on Wednesday.

While, this is significantly above its record low, when compared with where the currency was when the special forex measures were announced, the gains seem modest, in comparison with how the rupee appreciated in a similar window back in 2013.

Compared with the rupee's close against the greenback on June 4, the day before various measures were announced to boost forex flows, its appreciated just about 0.6 per cent as of August 5.

According to a ratings agency official, had the RBI measures not been there, the rupee could have slipped further towards 98 against the dollar.

The RBI Governor is hopeful that the rupee will further strengthen against the US dollar.

"It is quite possible going forward as the tensions and the conflict deescalates, it is quite possible that the rupee may further strengthen. It has strengthened from 97 levels to 95," Malhotra said.

He stressed that the underlying fundamentals of the economy had remained strong.

Malhotra reiterated the central bank's policy that it does not target any band for the rupee, but only intervenes when there is excessive volatility.

A major reason behind the rupee depreciation has been a massive selling by foreign portfolio investors in the the equity market. FPIs have offloaded around Rs 2.50 lakh crore from India's equity market this year. However, they turned net buyers in July, investing Rs 20,200 crore during the month.

Cooling oil prices have also helped reduce the rupee pressure. 

"Sustained FII inflows, softer crude prices, and a stable dollar could keep the rupee biased towards appreciation, although global geopolitical developments will continue to be closely monitored," said Jateen Trivedi, VP research analyst - commodity and currency at LKP Securities.

Tanvee Gupta Jain, chief India economist, UBS, said recently that the rupee was likely to remain stable amid a stronger US dollar and renewed geopolitical tensions.

More importantly, she sees India's balance of payments position improving significantly aided by the RBI measures.

"From an estimated deficit of $50 billion or more than 1 per cent of GDP at the peak of external stress, we now expect India's BoP to return to a surplus of 0.5 per cent of GDP in FY27, driven largely by the RBI's aggressive measures to mobilise foreign-currency funding," said Jain.

The policy support has helped to improve external financing conditions at a time when market concerns over oil prices, capital outflows and reserve adequacy had intensified, she stated.