India’s banking sector has seen $17 billion in FCNR(B) inflows within 40 days of the RBI’s Swap Facility launch in June. The RBI’s new US Dollar-Rupee Forex Swap Facility targets 3-5-year deposits, but the breakdown of the $17 billion across new inflows, renewals, or redirected deposits remains unclear.

This lack of clarity makes it difficult to know how much of this money is genuinely new dollar inflow versus funds simply being shifted from one account to another.

The latest set of data on NRI deposits released by the RBI is up to May 2026. As of the end of May, the FCNR outstanding balance was $34 billion, slightly up from $33.7 billion at the end of March.

The June-end data is expected to indicate a notably higher balance, with consistently higher balances extending to at least September. According to an SBI Research report, flows of total FCNR(B) deposits are expected to reach USD 26-28 billion by July 23 alone.

Interesting to note is that in 2025-26, the total outstanding balance for Foreign Currency Non-Resident FCNR(B) deposits was $33.75 billion ($33,756 million). The Swap Facility announced in June is in place till September 30, and the industry expects total mobilization of $65-$70 billion or even more from the NRIs, in just over 3 months.

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Why NRI Dollars Are Needed

But why has the RBI announced a scheme for attracting NRI deposits, by allowing Indian banks to offer a higher rate of interest to them without worrying about the depreciation of the Indian Rupee against the Dollar?

According to the RBI, it is to strengthen India’s balance of payments and incentivise capital inflows.

A dollar drought was becoming apparent. In 2024-25, there was an inflow of only $7 billion ($7,076 million) in FCNR(B) deposits, which fell to under $1 billion at $946 million in 2025-26.

The April-May 2026 provisional RBI data shows inflows dipping further to $282 million. This sharp, continuous decline made the situation urgent. The writing on the wall was clear. RBI had to launch a scheme for NRIs to send dollars home.

The Challenges NRIs Face

The first big challenge for NRIs is to consider the rate differential. Following July’s FOMC meeting, US rates remain stable at 3.5%-3.75%, while the US 10-year Treasury yield stands at 4.68%. NRIs in the US are getting up to 4.25% on 5-year deposits. This creates an opportunity for US-based NRIs to invest in FCNR deposits in India, offering returns of 6.5%-7% for a similar duration.

But the current situation differs from 2013, as back then US rates were near zero while Indian banks offered higher rates, attracting NRIs to invest in India.

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The other is leveraging. NRIs are increasingly taking loans to invest in FCNR(B) deposits, if they are eligible, with some overseas banks offering leverage of up to 19 times their capital, potentially yielding returns of 15-20%.

However, this kind of leverage sharply raises the risk involved. NRI investors should carefully evaluate whether they are flexible or fixed rates, rate differential, and tax implications before proceeding.

Tax implications are also creating obstacles for NRIs in several jurisdictions. Speaking to ANI, Devarsh Vakil, Head of Prime Research at HDFC Securities, said, “There are some tax rules which have been changed in the overseas market, especially in West Asia, Singapore, UK… and that’s why we have seen that the response to these schemes from these regions is a little lower than what the market expected. The government and regulators are working with overseas authorities to address the issue.”

Insights from RBI Data (2024-25 vs 2025-26)

The NRIs have three types of bank accounts at their disposal to park their funds with Indian banks. Besides FCNR, where only dollar funds can be parked, the NRE and NRO accounts are Rupee-denominated accounts.

Total NRI deposits were nearly flat, rising marginally from $164.6 billion to $165.6 billion, an increase of just $1 billion.

FCNR(B) balances rose from $32.8 billion to $33.7 billion, a gain of $0.9 billion.

NRE balances declined from $100.7 billion to $98.5 billion, a drop of $2.2 billion.

NRO balances rose from $31.1 billion to $33.3 billion, a gain of $2.2 billion, almost exactly offsetting the NRE decline.

The inflows for April-May 2025-26 were $1,009 million, which fell to $597 million in April-May 2026-27. This meant a 40% fall in NRE deposits, and it was telling something. NRIs could have sensed a dollar-denominated scheme may be in the offing by the government. That turned out right, and in June, the RBI announced the USD-INR forex Swap Facility scheme on FCNR deposits.

On June 8, the RBI decided to shield banks from the currency impact of the Indian rupee’s depreciation against the dollar by hedging through the Swap Facility for FCNR(B) Deposits, available for three to five years. Subsequently, on June 18, the RBI lifted the ceiling on interest rates for banks to offer to NRIs. These measures will be in effect until September 30, 2026.

Disclaimer: This article is based on official data released by the Reserve Bank of India and is intended for informational purposes only. It should not be construed as investment, financial, or legal advice. NRIs and investors are advised to consult their bank or a qualified financial advisor before making any decisions regarding FCNR(B) deposits or related instruments. Figures are subject to change based on subsequent RBI updates.