RBI Forex Swap Draws $72.85B: FCNR(B) Deposits Lead
By ThePip Desk
The Reserve Bank of India’s special USD-INR forex swap facility attracted $72.85 billion in inflows, with FCNR(B) deposits accounting for the majority.
The Reserve Bank of India’s special USD-INR forex swap facility has amassed $72.85 billion in total inflows as of August 21, 2026. This significant accumulation reflects strong interest, particularly from non-resident Indian deposits, according to reports from authorized dealer banks to the RBI.
A substantial portion of these funds, specifically $65.397 billion, originated from Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits. Other contributions came from External Commercial Borrowings (ECBs) and Overseas Foreign Currency Borrowings (OFCBs).
- Total Inflows: $72.85 billion
- FCNR(B) Deposits: $65.397 billion
- External Commercial Borrowings (ECBs): $2.591 billion
- Overseas Foreign Currency Borrowings (OFCBs): $4.860 billion
The RBI initially introduced this swap window on June 8. It later advanced the closure date for FCNR(B) deposits by a month to August 31, 2026, citing an “encouraging response” and significant forex inflows. In contrast, the facilities for ECBs and OFCBs will remain accessible until December 31, 2026.
Understanding the Swap Facility Mechanism
The scheme is strategically designed to make FCNR(B) deposits attractive, primarily for non-resident Indians (NRIs). It achieves this by offering specific benefits to banks participating in the program.
- It provides banks with a zero-cost principal hedge.
- Banks receive regulatory exemptions.
- The facility includes leverage options.
Broader Intent and Market Implications
Despite the substantial influx of funds, the RBI’s scheme is primarily a stabilization and liquidity-enhancement measure. It is not intended to significantly boost foreign exchange reserves or act as a catalyst for rupee appreciation.
The billions of dollars flowing in have stimulated deposit growth and are expected to result in softer deposit rates. However, this is also projected to temporarily impact banks’ Net Interest Margins (NIMs), potentially contracting them by 3-15 basis points.
Experts anticipate this effect on margins will be temporary, with NIMs correcting over time. Many banks indicated in their Q1FY27 earnings calls that replacing high-cost bulk deposits will be a priority.