The Reserve Bank of India on Monday excluded swap positions arising out of foreign currency non-resident bank {FCNR (B)} deposits and external commercial borrowings (ECBs) from the
$100-million net open position limit.

While detailing the outcome of the monetary policy committee meeting on Friday, RBI Governor Sanjay Malhotra announced providing concessional forex swap for overseas borrowing and covering full hedging cost for FCNR deposits, along with other measures to attract foreign inflows and support the currency.

The swap facility will be available only to authorised dealer category 1 banks for FCNR (B) deposits mobislied with a minimum tenure of three years and a maximum of five years. Under the scheme, banks may set deposit rates according to their own internal policies.

These deposits will also be exempted from the requirement of statutory liquidity ratio (SLR) and cash reserve ratio (CRR), the RBI said.

The facility is effective immediately and will remain available until October 16, 2026, for deposits raised through September 30, 2026.

Banks can mobilise deposits in any freely convertible currency. However, the swap facility will only be available in US dollars. For deposits mobilised in other currencies, banks may arrive at the equivalent US dollar amount eligible to be swapped by converting the same at the prevailing market rates on the day of the swap deal.

The RBI said deposits will have a lock-in period of one year. “Banks may permit early withdrawal after one year at their discretion. Swaps with the RBI, however, cannot be cancelled.”

It also said a bank can avail of the swap facility only once in a week. “During any week, the maximum amount of US dollars that a bank would be eligible to swap with the RBI would be equal to all eligible FCNR (B) deposits mobilised in equivalent US dollar terms during the preceding week(s) for which the facility has not been availed earlier.”

The RBI asked banks to maintain separate records for FCNR (B) deposits covered under the facility.

Under the swap, a bank can sell dollars to the RBI in multiples of $1 million and agree to repurchase the same amount at the end of the swap. The first leg of the transaction is settled at the FBIL Reference Rate. The second leg of the swap will take place at the same rate as the first leg.

Concessional swap for ECBs

The RBI has also issued guidelines for swap facility for ECBs by public sector entities with an average maturity of three years. The swap will be undertaken at a fixed rate of 1.5% per annum compounded semi-annually.

Available with an immediate effect, the facility will be used till January 15, 2027, for eligible ECB drawdowns received by December 31, 2026.

Barclays in a report said concessional forex swap for ECBs may see an uptake of around $ 10-15 billion over the next few months, while it estimated $15-20 billion through the FCNR (B) deposits scheme. However, it do not expect large inflows due to elevated global rates and constrained liquidity.