Finance Minister Nirmala Sitharaman will meet public sector bank chiefs on Monday to address a sharp decline in FCNR(B) deposit inflows. The discussion will focus on recent RBI measures, including the removal of interest rate caps and new swap facilities, intended to attract more NRI funds and boost external commercial borrowings.
Finance Minister Nirmala Sitharaman is scheduled to meet with the heads of public sector banks on Monday, July 13, 2026, to conduct a formal review of efforts to mobilize foreign currency deposits. This meeting follows a significant drop in inflows into Foreign Currency Non-Resident (Bank) accounts, commonly known as FCNR(B) deposits. Recent official data highlights that these net inflows have contracted to USD 946 million in the current fiscal year, a sharp decline from the USD 7.1 billion recorded in the previous year.
RBI Regulatory Changes to Support Inflows
To counter this trend and encourage Non-Resident Indians, Overseas Citizens of India, and Persons of Indian Origin to increase their holdings in domestic banks, the Reserve Bank of India introduced several policy adjustments last month. Notably, the central bank removed the interest rate ceiling on fresh FCNR(B) deposits with maturities ranging from three to five years. This relaxation is currently scheduled to remain in effect until September 30, 2026.
Additionally, the RBI has implemented a concessional foreign exchange swap facility. This measure is intended to lower hedging costs for banks, making it more viable for them to accept and manage these long-term foreign currency deposits without bearing the full burden of currency volatility risks.
Strategy for External Commercial Borrowings
The upcoming review will also cover the mobilization of funds through External Commercial Borrowings. Public sector undertakings are frequent participants in international debt markets, and the RBI has similarly introduced a concessional forex swap facility for these entities to support their borrowing activities until the end of September 2026.
Analysts at SBI Research have indicated that these incentives are designed to revitalize interest in overseas debt instruments. This comes after total flows from External Commercial Borrowings and Foreign Currency Convertible Bonds faced a nearly 30% reduction during the previous fiscal year. Beyond managing foreign inflows, the Finance Minister is also expected to emphasize the importance of maintaining steady credit growth for productive sectors within the domestic economy.
For investors and market participants, the key monitorable following this meeting will be the extent to which these regulatory incentives translate into actual deposit growth and whether public sector banks can effectively lower their cost of funding through these new swap windows. The effectiveness of these measures in reversing the downward trend in forex inflows will likely be reflected in future banking liquidity reports and the upcoming quarterly performance updates of major public sector lenders.