FCNR-B deposits: Economic benefits outweigh hedging costs, says Sanjay Malhotra
The RBI had introduced the special USD-INR forex swap facility on June 8, 2026, as part of efforts to strengthen foreign exchange reserves and support balance of payments conditions. The facility allowed banks to offer higher interest rates on FCNR(B) deposits by transferring the currency hedging cost to the central bank.
Reserve Bank of India Governor Sanjay Malhotra has defended the economic benefits of the FCNR-B deposits scheme over the costs of hedging currency risk, stating that the central bank's primary focus was the overall benefit to the economy. The FCNR-B facility, introduced on June 8, 2026, allowed banks to offer higher interest rates on foreign currency deposits by transferring the currency hedging cost to the RBI.
Banks mobilized USD 133 billion through the scheme, which closed on August 31. Malhotra emphasized that the repayment risks were manageable, citing strong macroeconomic fundamentals and adequate foreign exchange reserves as buffers.
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