The Reserve Bank of India (RBI) has decided to close its special swap window for Foreign Currency Non-Resident Bank (FCNR(B)) deposits earlier than planned.
The facility will now be available only for deposits mobilised up to August 31, 2026, instead of the earlier September 30 deadline.
The RBI said the decision was taken because the scheme received an “encouraging response” and attracted a large amount of foreign currency into India.
As of August 13, inflows through the facility had crossed $52.3 billion, which was higher than the level many market watchers had expected.
Why Is the RBI Closing the Window Early?
The special swap facility was launched on June 8, 2026, to encourage foreign currency inflows through FCNR(B) deposits, External Commercial Borrowings (ECBs) and Overseas Foreign Currency Borrowings (OFCBs).
Under the arrangement, banks could use a three-to-five-year swap facility with the RBI, which helped cover their foreign exchange hedging costs.
The scheme proved highly attractive, particularly for overseas depositors.
However, the rapid increase in inflows also created a new concern for the RBI.
Keeping the FCNR(B) window open for longer could result in even larger foreign-currency liabilities that would eventually have to be managed when these deposits mature.
Total Inflows Cross $56 Billion
RBI data showed that authorised dealer banks had reported $52.3 billion in FCNR(B) deposits as of August 13.
In addition, the facility attracted around $2.805 billion through OFCBs and $1.741 billion through ECBs.
Together, total inflows under the facility have reached approximately $56.85 billion.
The RBI has clarified that the schemes for ECBs and OFCBs will continue as planned until December 31, 2026.
While new FCNR(B) deposits under the special facility will be accepted only until August 31, swaps against eligible deposits mobilised under the facility can still be undertaken with the RBI until September 11.
Why Did FCNR(B) Deposits Become So Popular?
The special facility made FCNR(B) deposits more attractive to overseas investors.
The RBI had temporarily removed interest-rate caps on fresh FCNR(B) and NRE deposits.
Banks then increased the interest rates offered on these deposits, encouraging more overseas investors to bring their dollars into Indian banks.
This resulted in a sharp rise in foreign currency inflows, even amid high US interest rates, oil price uncertainty and geopolitical tensions.
RBI Faces a Challenge When Deposits Mature
The large inflows are also being compared with the RBI’s 2013 FCNR(B) mobilisation programme, which attracted around $26 billion during a period when the Indian rupee was under heavy pressure.
That earlier programme helped strengthen India’s foreign exchange reserves.
However, the RBI later had to carefully manage the outflow of foreign currency when those deposits matured.
The current inflows are much larger, which makes maturity management an important consideration for the central bank.
By closing the special FCNR(B) window earlier, the RBI appears to be balancing the benefit of attracting foreign currency with the need to avoid taking on excessive future foreign exchange liabilities.
