Archive · 2 Oct 2026
FCNR Inflows Cushion Rupee, But FII Flows Needed
FCNR deposits are money that people living outside India keep in Indian banks in foreign currencies.
Nuvama Research says these deposits have helped India’s rupee stay steadier.
They also helped increase the country’s foreign exchange reserves by about $100 billion.
The deposits supported India’s balance of payments while foreign investors were investing less money.
They also increased the amount of money available in the banking system.
However, this extra support may not last forever.
India’s goods trade deficit has become very large, even though services exports and remittances are helping.
The report says foreign institutional investors will eventually need to return for longer-lasting stability.
FCNR inflows have supported India’s rupee and balance of payments amid weak FII flows.
The inflows helped boost India’s foreign exchange reserves by around $100 billion.
Systemic liquidity rose from about 1% to 3% of NDTL in September.
Services exports and NRI remittances continue to support the current account.
Nuvama Research said lasting external stability will require a meaningful return of FII flows as India’s goods deficit reaches about 9% of GDP.
- Who
- Nuvama Research analyzed FCNR deposits, FII flows and India’s external finances.
- What
- FCNR inflows have supported the rupee, foreign exchange reserves and the balance of payments, but FII flows are considered important for lasting stability.
- When
- The report was published on October 2, 2026; it discusses developments including September liquidity conditions.
- Where
- India.
- Why
- FCNR support may be absorbed over time while the goods trade deficit remains large and FII flows are weak.
- Report author
- Nuvama Research
- Foreign exchange reserve support
- Around $100 billion from FCNR inflows
- Systemic liquidity
- Rose from around 1% to 3% of net demand and time liabilities in September
- Bank credit growth
- About 19% over the previous two months
- Goods trade deficit
- Around 9% of GDP, described as a decade-high
- Current-account support
- Services exports and NRI remittances
- Long-term requirement
- A meaningful return of foreign institutional investor flows
