Public sector banks have seen robust interest in FCNR(B) deposits and foreign borrowings after the RBI introduced new swap facilities in June 2026. The move aims to strengthen foreign exchange reserves, with banks reporting significant inflows from global hubs like the US, UK, and Singapore. Finance Minister Nirmala Sitharaman has encouraged banks to further intensify outreach through GIFT City units.
Finance Minister Nirmala Sitharaman met with heads of public sector banks and financial institutions on Monday to evaluate the progress of recent initiatives designed to attract foreign currency. The review centered on the Reserve Bank of India’s foreign currency swap facilities, which were launched on June 5, 2026, to bolster India's foreign exchange reserves and improve the balance of payments.
Impact on Bank Deposit Mobilization
Bank executives reported a positive response from the Indian diaspora regarding Foreign Currency Non-Resident (Bank) deposits, often called FCNR(B) deposits. Interest has also been notable in External Commercial Borrowings and Overseas Foreign Currency Borrowings. A key factor driving this trend is the RBI’s decision to remove the interest rate ceiling on fresh FCNR(B) deposits, allowing banks to offer more competitive returns. This flexibility has made these deposits more attractive to non-resident investors compared to previous periods.
Global Markets and GIFT City Strategy
Banks noted that the demand for these schemes is particularly strong in major financial centers, including the United Kingdom, the United States, Hong Kong, Singapore, and West Asia. To maintain this growth, public sector lenders are increasingly utilizing their International Banking Units located at the International Financial Services Centre in GIFT City, Gujarat. By leveraging this ecosystem, banks aim to tap into global fund pools more efficiently.
Monitoring and Future Expectations
During the meeting, the RBI highlighted its daily reporting framework, which allows for real-time monitoring of inflows across all participating institutions. This transparency helps the central bank assess the effectiveness of the swap facilities. Bank officials expressed confidence that the mobilization of External Commercial Borrowings will see continued momentum, particularly throughout the third quarter of the 2026-27 financial year.
For investors, the primary takeaway is the focus on improving external sector resilience through these liquidity-focused measures. The Finance Minister has urged lenders to continue innovating their digital outreach programs to engage the NRI community effectively. The swap window for fresh FCNR(B) deposits remains open until September 30, 2026, while the facility for External Commercial Borrowings and Overseas Foreign Currency Borrowings is available until December 31, 2026. Investors may track upcoming bank quarterly results to see if these deposit inflows lead to improved cost of funds or better liquidity positions for major lenders.