FCNR (B) inflows: India’s forex reserves soar to an all-time high of $729.328 billion

In the week ended August 21, 2026, India's foreign exchange reserves reached an all-time high of $729.328 billion, up by $12.422 billion from the previous week. This surge was primarily driven by strong inflows into foreign currency non-resident (Bank) deposits, facilitated by banks under the RBI's limited period concessional swap facility.

Since March 2026, India's reserves have grown by $38.221 billion, surpassing the previous record high of $728.494 billion set in February 2026. The RBI announced an early end (August 31) to the concessional swap facility, leading to increased inflows into FCNR (B) deposits. Between June 8, 2026, when banks began mobilizing resources under the RBI's concessional swap facility, till August 21, 2026, FCNR (B) deposits increased by $65.397 billion.

Manoranjan Sharma, Chief Economist at Infomerics Ratings, noted that the sharp rise in forex reserves is due to an exceptional inflow episode, not just a trade surplus improvement. He emphasized that the reserve accumulation strengthens India's external shock absorber, providing the RBI with the capacity to manage disorderly rupee depreciation, finance essential imports, and reassure foreign investors.

However, Sharma highlighted that the quality and durability of the increase matter, as deposit-led inflows raise external liabilities and may reverse when incentives expire or global yields change. Amit Pabari, MD of CR Forex Advisors, stated that the RBI's measures, including a special USD-INR Forex Swap facility for FCNR (B) deposits, ECB, and OFCB inflows since June 8, 2026, have led to a steady inflow of $72.848 billion as of August 21.

However, most of the dollars are being deposited into RBI's reserves rather than circulating in the open market.