Finance Minister Nirmala Sitharaman is set to meet public sector bank heads on July 13 to boost foreign currency deposits from NRIs. This follows a sharp decline in FCNR(B) inflows to $946 million in FY26. The move aims to support forex liquidity through relaxed interest rate caps and RBI swap facilities for banks and CPSEs.
Finance Minister Nirmala Sitharaman will hold a meeting with the leadership of public sector banks (PSBs) on July 13 to focus on strategies for increasing foreign currency inflows. A core part of the discussion will be mobilizing Foreign Currency Non-Resident (FCNR) deposits from Non-Resident Indians, Overseas Citizens of India, and Persons of Indian Origin.
Easing Rules to Revive Inflows
The meeting comes at a time when foreign currency deposit growth has seen a significant cooling off. Recent data highlights that net inflows into FCNR(B) deposits dropped to $946 million in FY26, down sharply from $7.1 billion in the previous fiscal year. To counteract this, the Reserve Bank of India (RBI) has removed interest rate ceilings on fresh FCNR(B) deposits with maturities between three and five years. This relaxation is currently scheduled to remain in effect until September 30, 2026.
Support for CPSE Borrowings
Beyond deposit mobilization, the government is looking to streamline foreign currency access for state-owned companies. The RBI is providing a concessional foreign exchange swap facility to banks to lower the cost of hedging foreign currency risk on these deposits. A similar swap facility has been extended to help Central Public Sector Enterprises (CPSEs) raise funds via External Commercial Borrowings (ECBs). Industry analysts estimate that CPSEs typically tap international markets for $10 billion to $12 billion annually, and this window offers a potential 3% cost advantage for those looking to secure capital before the September deadline.
Impact on Overall Capital Flows
The broader financial environment has faced pressure, with total ECB and Foreign Currency Convertible Bond (FCCB) flows falling by approximately 30% to $42.9 billion in FY26 compared to $61.2 billion in FY25. By encouraging PSUs to utilize these current incentives, the government aims to reverse this trend and improve the supply of foreign currency in the Indian market. SBI Research has indicated that these policy incentives could lead to a pickup in ECB issuances.
In addition to the foreign currency agenda, the Finance Minister is expected to review the status of credit growth within the banking sector. The discussion will include various financial institutions, including IDBI Bank, with a focus on ensuring that credit is being directed toward productive and growing segments of the Indian economy. Investors should track subsequent bank-specific disclosures to see if these measures lead to a meaningful recovery in foreign currency deposit books and how CPSEs adjust their borrowing strategies in the coming quarter.