RBI forex swap window draws $143.59 bn, FCNR(B) deposits lead inflows

The Reserve Bank of India's (RBI) special US dollar-rupee forex swap facility has seen a remarkable $143.596 billion in foreign currency inflows as of September 18, with Foreign Currency Non-Resident (Bank), or FCNR(B), deposits contributing the majority. FCNR(B) deposits under the facility totaled $132.98 billion, while Overseas Foreign Currency Borrowings (OFCBs) and External Commercial Borrowings (ECBs) contributed $5.32 billion and $5.296 billion respectively.

Introduced on June 8, the facility aimed to encourage fresh foreign currency inflows, bolster the nation's external reserves, and alleviate domestic liquidity strain. Banks could mobilize fresh three-to-five-year FCNR(B) deposits and swap them with the RBI at a lower rate, thus cutting hedging costs. The RBI decided to conclude the window for fresh FCNR(B) deposits a month early, on August 31, due to the "positive response."

Swaps against existing deposits could continue with the RBI until September 11. The $132.98 billion raised through FCNR(B) deposits alone far surpasses the $26 billion mobilized under a similar 2013 scheme during a period of heightened rupee pressure. FCNR(B) deposits can be held by non-resident Indians, Overseas Citizens of India, and Persons of Indian Origin in various foreign currencies.

The RBI also extended concessional swap arrangements to eligible ECBs and OFCBs, which remain open until December 31, 2026. This move was part of a broader initiative announced in June to attract foreign capital and alleviate rupee pressure. The surge in inflows has bolstered the external financing buffer available to the Indian banking system.

RBI Governor Sanjay Malhotra highlighted that the robust flows fortify India's external position, emphasizing that the central bank does not aim for a specific exchange rate for the rupee. The latest data underscore the unprecedented scale of the RBI's 2026 forex mobilization exercise, with all three windows collectively attracting nearly $144 billion of foreign currency inflows by September 18.

Despite these organic drivers, such as tax-related outflows and seasonal currency leakage, concerted efforts will be necessary to manage the potential liquidity surge, according to an analyst.