1 month ago
RBI Swap Facility Revives FCNR(B) Deposits
The Reserve Bank of India (RBI) introduced a new Swap Facility to encourage Non-Resident Indians (NRIs) to deposit foreign currency in Indian banks.
This facility protects banks from currency risks and allows them to offer higher interest rates.
As a result, there has been a significant increase in deposits, totaling $17 billion in just 40 days.
However, experts have mixed views on whether this trend will continue, with some optimistic about future inflows and others cautious about potential challenges.
FCNR(B) inflows totaled $17 billion in 40 days after the RBI introduced the Swap Facility.
Inflows had declined by 87% from 2024-25 to 2025-26 before the turnaround.
The RBI removed the interest rate ceiling and offered hedging support to banks.
Interest rates on FCNR(B) deposits increased to 6-7.1%, making them highly competitive globally.
Experts forecast cumulative deposits of $45-$50 billion by the end of the scheme in September 2026.
- Who
- Reserve Bank of India (RBI) and Non-Resident Indians (NRIs)
- What
- Implementation of the RBI Swap Facility for FCNR(B) deposits
- Where
- India
- When
- June 8, 2026 to July 17, 2026
- Why
- To revive foreign currency inflows from NRIs and stabilize the Indian rupee
Optimistic View
Cautious View
Future of FCNR(B) Deposits
Optimistic View
Experts hope for a significant increase in deposits, similar to the 2013 experience, with forecasts of $45-$50 billion by the end of the scheme.
Cautious View
Potential headwinds include rising global dollar rates, foreign tax treatments, and long onboarding processes that could slow fresh inflows.
Key facts
- FCNR(B) Inflows 2024-25
- $7,076 million
- FCNR(B) Inflows 2025-26
- $946 million
- FCNR(B) Inflows April-May 2026
- $282 million
- FCNR(B) Inflows June 8 - July 17, 2026
- $17 billion
- Total Outstanding FCNR(B) Balance as of May 2026
- $34 billion
- Interest Rates Post-Swap Facility
- 6-7.1%
- Scheme End Date
- September 30, 2026
Quotes
Sneha Pandey
Fund Manager, Fixed Income, Quantum AMC
“RBI absorbing the full hedging cost let banks push USD deposit rates from the 2-4% range to as high as 6-7.1%, instantly making FCNR(B) one of the most competitive dollar-deposit products globally.”
financialexpress.com
“The scale of FCNR (B) deposits likely included renewals as well as fresh deposits, explaining the overall push by officials to increase the scale of new flows under this window.”
financialexpress.com
Sources
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