RBI limits FCNR(B) forex swap facility after $52.3 bn inflows; ECB, OFCB window stays open

The Reserve Bank of India (RBI) has decided to bring forward the closure of its special forex swap facility for Foreign Currency Non-Resident (Bank), or FCNR(B), deposits after the scheme attracted $52.3 billion in foreign exchange inflows.

The central bank said on Friday that the facility will now be available for FCNR(B) deposits mobilised only until August 31, 2026. However, swaps against these deposits can continue to be availed from the RBI until September 11, 2026.

The decision follows what the RBI described as an encouraging response to the facility, which was introduced on June 8, 2026. The broader USD-INR forex swap facility covered FCNR(B) deposits, External Commercial Borrowings (ECBs) and Overseas Foreign Currency Borrowings (OFCBs).

The measures were aimed at attracting foreign currency inflows from non-resident Indians and encouraging banks and state-run companies to access overseas dollar funding.

As of August 13, the three channels had generated total forex inflows of $56.846 billion, according to data reported by authorised dealer banks. FCNR(B) deposits accounted for the bulk of the inflows at $52.3 billion.

The scheme for ECBs and OFCBs, however, will continue to remain open until December 31, 2026, as previously scheduled.

Bank deposits rise sharply

The surge in foreign currency inflows has also coincided with a sharp increase in India's banking system deposits. According to RBI data cited by Reuters, bank deposits rose by a cumulative ₹11 trillion ($115.25 billion) over the three fortnights to July 31.

Total bank deposits reached a record ₹269.4 trillion, with market participants attributing a significant part of the recent increase to the conversion of dollar inflows received under the FCNR(B) scheme into rupees.

This followed a net decline of ₹3.87 trillion in bank deposits between April 1 and June 15.

Between June 5 and July 31, the measures had attracted $40.8 billion, including $36.7 billion through FCNR(B) deposits and $4.1 billion through ECBs and OFCBs combined.

Strong response supports rupee

The strong response to the FCNR(B) facility had earlier prompted Jefferies to estimate that inflows could reach $80-100 billion by the time the facility closed.

The brokerage said strong FCNR(B) inflows were positive for India's capital flows and could help support the rupee after a period of weakness. The rupee had touched 96.96 against the US dollar in May and was trading at 95.17 when Jefferies prepared its report.

The FCNR(B) facility is also part of India's earlier efforts to attract foreign currency deposits and support the rupee, with similar schemes introduced in 1993 and 2013.