The Reserve Bank of India will continue its concessional swap facility for FCNR(B) deposits until the original deadline of September 30, 2026. This move comes as the scheme has already successfully attracted $36.7 billion in deposits, helping to boost India's foreign exchange reserves and stabilize the rupee.
The Reserve Bank of India (RBI) has confirmed that its special swap facility for Foreign Currency Non-Resident (Bank) deposits, or FCNR(B), will remain in place until its scheduled conclusion on September 30, 2026. Governor Sanjay Malhotra stated that the central bank has no plans to shut the facility early, effectively dismissing any uncertainty regarding the timeline for the program.
This initiative, which began on June 8, 2026, has seen a strong response from the banking system. As of July 31, 2026, the facility has attracted approximately $36.725 billion in deposits. These inflows have played a significant role in reinforcing India's foreign exchange reserves and providing support to the rupee in the face of global economic pressures.
The FCNR(B) swap facility is a tool designed to help banks mobilize foreign currency deposits from Non-Resident Indians (NRIs). Under this program, the RBI essentially absorbs the cost of hedging—the expense banks usually pay to protect themselves against currency fluctuations. By removing this cost for banks, the RBI enables them to offer more attractive and competitive interest rates to NRI depositors on 3-5 year deposits. This makes it easier for banks to bring dollars into the country.
For the broader economy, these inflows act as a stabilizer. A steady stream of foreign currency helps the central bank manage the rupee's volatility. Governor Malhotra noted that the central bank continues to view the rupee's performance as robust, with recent fluctuations largely driven by geopolitical factors rather than fundamental weakness.
Investors and market participants often look at these inflows as a measure of the health of India's external sector. However, the key monitorable for the coming months will be what happens after the September 30 deadline. Currently, banks can offer higher rates on these deposits because the RBI is taking on the hedging risk. Once this window closes, banks may need to adjust the interest rates they offer on new FCNR(B) deposits to reflect the actual cost of hedging currency risk.
Looking ahead, the focus will shift to whether the momentum of these inflows remains consistent as the program nears its end date. While the RBI maintains that this is a standard part of reserve management, the market will track how banks transition their deposit products once the concessional swap window is no longer available.