The Reserve Bank of India (RBI) on Friday announced the closure of its special swap window for Foreign Currency Non-Resident (Bank) deposits – (FCNR(B)– effective August 31, a month ahead of the original schedule. The central bank cited an “encouraging response” to the scheme for the decision.
The move indicates that the inflows until month-end will meet the scheme’s purpose and stems from concerns that higher inflows could create additional forex liabilities.
FE reported on August 10 that the RBI might close the window, which offers high tax-free returns on dollar bank deposits of non-resident Indians, much earlier than the September 30 deadline set previously, and that an announcement might be expected once inflows through this route reached $50 billion. As of August 13, inflows under the special facility exceeded $52.3 billion.
“Based on the encouraging response to the Swap Facility for FCNR(B) deposits and the resultant forex inflows, it has been decided that the Swap facility for FCNR(B) deposits will be available only for deposits mobilised till August 31, 2026,” the RBI said on Friday. The central bank,however, added that swaps against FCNR(B) deposits mobilised under the facility could still be availed with the RBI until September 11.
Surge in Inflows
The special facility, introduced on June 8, 2026, was aimed at attracting foreign currency through FCNR(B) deposits, External Commercial Borrowings (ECBs), and Overseas Foreign Currency Borrowings (OFCBs), with the RBI offering banks a three-to-five-year swap facility that effectively covered hedging costs.
According to data released by the RBI, authorised dealer banks had reported $52.3 billion of FCNR(B) deposits, $2.805 billion through OFCBs and $1.741 billion through ECBs as of August 13. Total inflows under the facility have now reached $56.85 billion.
“The Scheme for ECBs and OFCBs will continue to be open till December 31, 2026, as hitherto,” it added.
Managing Maturity Risks
The decision comes after a sharp acceleration in inflows had prompted concerns that keeping the FCNR(B) window open until September could create a much larger stock of foreign-currency liabilities for the central bank to manage when the deposits eventually mature.
The facility had made FCNR(B) deposits significantly more attractive to overseas investors after the RBI temporarily removed interest-rate caps on fresh FCNR(B) and NRE deposits. Banks responded by sharply raising deposit rates, triggering a surge in dollar inflows despite elevated US interest rates, oil-price volatility and geopolitical uncertainty.
The scale of the inflows has also revived comparisons with the RBI’s 2013 FCNR(B) mobilisation programme, which raised about $26 billion during a period of intense pressure on the rupee. While that episode helped bolster reserves at the time, the RBI had to manage the eventual maturity-related outflows carefully.