Archive · 26 Aug 2026
Reserve Bank Closes FCNR(B) Swap Window Early Amid Inflows
The Reserve Bank created a special facility to encourage banks to attract foreign-currency deposits from NRIs.
It originally planned to keep the facility open until September 30, 2026.
On August 5, Governor Sanjay Malhotra said no early closure proposal was being considered at that time.
On August 14, the Reserve Bank moved the deposit deadline forward to August 31.
The change came after very large amounts of foreign currency entered the facility.
FCNR(B) deposits reached USD 65.397 billion by August 21.
Banks can still finish certain swaps until September 11.
NRIs can continue opening ordinary FCNR(B) deposits, but new deposits after the cutoff will not get the special swap-linked benefit.
The Reserve Bank of India moved the FCNR(B) deposit cutoff from September 30, 2026, to August 31.
Banks may complete swaps for eligible deposits until September 11, while ECB and OFCB swap facilities remain open until December 31.
FCNR(B) deposits rose from USD 52.3 billion on August 13 to USD 65.397 billion on August 21.
The Reserve Bank said the early closure followed an encouraging response and strong foreign-exchange inflows.
NRIs can still book regular FCNR(B) deposits after August 31, but new deposits will not receive the special swap rate.
- Who
- The Reserve Bank of India, Governor Sanjay Malhotra, banks, and NRI depositors.
- What
- The Reserve Bank of India ended the special FCNR(B) swap window for new eligible deposits one month earlier than planned.
- When
- The decision was announced on August 14; the new deposit cutoff is August 31, with swaps allowed until September 11.
- Where
- The facility operates through banks and the Reserve Bank of India; the articles do not specify a physical location.
- Why
- The Reserve Bank cited an encouraging response and substantial foreign-exchange inflows.
Early Closure Concern
Changed Conditions Explanation
Was the decision a reversal?
Early Closure Concern
Banks and market participants could view the move as surprising because, on August 5, the Governor said no proposal to close the facility early was under consideration.
Changed Conditions Explanation
The Governor's statement described the position at that time, rather than promising that the facility would remain open regardless of future developments.
Why did the Reserve Bank close early?
Early Closure Concern
The abrupt timeline change created uncertainty for NRIs and banks relying on the original September 30 deadline.
Changed Conditions Explanation
The Reserve Bank said the facility had received an encouraging response and generated substantial inflows, suggesting its foreign-currency objective had largely been achieved.
Was swap cost the main factor?
Early Closure Concern
Market discussion raised the possibility that the cost of providing the hedge influenced the decision.
Changed Conditions Explanation
SBI Research assessed that the cumulative cost would likely remain small relative to India's foreign-exchange reserve buffer and was unlikely to be the main reason.
- Original deposit deadline
- September 30, 2026
- Revised deposit deadline
- August 31
- Final swap-completion date
- September 11
- FCNR(B) deposits by August 13
- USD 52.3 billion
- FCNR(B) deposits by August 21
- USD 65.397 billion
- Total inflows across three facilities by August 21
- USD 72.848 billion
- USD FCNR(B) rates effective August 20
- 6.25% for three to less than four years; 6.30% for four to less than five years and five years