Inside India’s $136 bn forex inflow: How 2026 FCNR deposit scheme outpaced 2013 by 4x

Add another $5.3 billion through overseas foreign-currency borrowings and $3.9 billion through external commercial borrowings and total foreign-currency inflows under the RBI’s broader 2026 package had reached $136.4 billion, according to the central bank’s data.

2026 FCNR deposit scheme outpaces 2013 by 4x

The scale caught even analysts tracking the programme closely by surprise. Brokerage group Nomura had expected FCNR(B) mobilisation of around $80-90 billion, while Jefferies’ upper-end estimate for the broader programme had been $100 billion.

However, more than the absolute number, it is the historical comparison that makes the 2026 exercise stand out.

According to Nomura, the $127.2 billion raised through FCNR(B) deposits is equivalent to 3.1% of India’s GDP, compared with 1.4% for the corresponding 2013 programme. The mobilisation is also equal to 76.8% of the stock of outstanding NRI deposits before the scheme, twice the 38.3% ratio seen in 2013.

Jefferies reached much the same conclusion from another perspective. Including FCNR(B), external commercial borrowings and overseas foreign-currency borrowings, the 2026 exercise has brought in roughly four times the $34 billion raised through the RBI’s special windows in 2013. This year’s inflows amount to around 5% of Indian bank deposits, 6% of bank credit and 20% of the country’s forex reserves, according to the brokerage.

Fundraising exercise in a different league

India has tapped its overseas population for foreign currency several times before, usually when external conditions were uncomfortable. But none of the earlier exercises came close to 2026 in absolute terms.

Nomura’s historical comparison showed that the India Development Bond raised $1.6 billion in 1991, Resurgent India Bonds brought in $4.2 billion in 1998 and the India Millennium Deposit raised $5.5 billion in 2000. The 2013 FCNR(B) programme, which had previously been the standout exercise, mobilised $26 billion in FCNR(B) deposits.

The instruments and circumstances are not strictly comparable, but the numbers illustrate the change in scale. Part of the answer lies simply in how much larger the pool of overseas Indian money has become.

Nomura estimated outstanding NRI deposits at about $165.7 billion around the 2026 exercise, compared with $67.9 billion in 2013. Annual private remittances have increased to about $168.2 billion from $65.1 billion over the same period, while the estimated NRI and person-of-Indian-origin diaspora has expanded to 37.3 million from 21.9 million.

In other words, the RBI was tapping a much larger base of overseas savings than it could in 2013.

What this matters is because an FCNR(B) deposit allows an NRI to keep a fixed deposit with an Indian bank in foreign currency rather than taking rupee exposure. Jefferies noted that the principal and interest can be freely repatriated and interest earned is tax-free in India.

Design was more generous to banks

The second part of the explanation lies in the economics offered to banks. In 2013, the RBI allowed banks to swap dollars raised through fresh FCNR(B) deposits into rupees at a concessional fixed cost of 3.5% a year. Under the 2026 arrangement, the RBI bore the full hedging cost on eligible deposits, meaning banks can raise foreign-currency deposits without absorbing that hedge expense themselves, according to Jefferies’ analysts.

The 2026 window also covers both fresh deposits and rollovers of maturing FCNR(B) deposits, whereas the 2013 programme was restricted to fresh deposits. Banks were also able to use non-fund based facilities that could support leveraged deposit mobilisation, while eligible deposits continued to enjoy exemption from cash reserve ratio and statutory liquidity ratio requirements.

That combination gave banks more room to offer competitive FCNR(B) rates without taking on the full currency-hedging burden.

The success is particularly notable because the broader interest-rate environment is, in some respects, less favourable than it was in 2013. Jefferies’ analysis showed that the gap between Indian and US government bond yields has narrowed sharply over the past 13 years. India’s three-year government bond yielded 9.3% in September 2013 against about 0.8% in the US; the corresponding spread is now close to 2%. Similar compression is visible in five and 10-year yields.

Nomura’s comparison also showed that US two-year yields are around 4% now against just 0.3% in 2013. Yet the indicative dollar coupon on the 2026 FCNR(B) exercise was around 6%, compared with 4.4% in 2013.

That suggests the sheer size of the mobilisation cannot be explained by interest-rate differentials alone. A larger NRI savings pool, improved economics for banks and the structure of the RBI facility all appear to have played a role.

Banks also competed hard for the deposits as Jefferies’ bank-level data through July showed foreign banks gaining particularly strongly. Their share of outstanding FCNR(B) deposits increased to 15% from 2% in early June and they accounted for about 30% of incremental deposits over that period. HSBC led the incremental mobilisation in Jefferies’ July data, followed by State Bank of India and ICICI Bank.

The final rush: Why $60 bn entered in last 10 days before deadline

The most dramatic phase came after the RBI announced that it would close the FCNR(B) window on August 31 rather than continue until the original September 30 deadline.

Nomura said more than $60 billion arrived in the final 10 days, almost doubling FCNR(B) mobilisation from the level recorded on August 21. Jefferies similarly estimated that banks raised more than $60 billion over those final 10 days.

For Nomura, the scale of that rush suggested that the RBI’s decision to close the scheme early was warranted as demand had already overwhelmed initial expectations.

Not all of the headline $127.2 billion should, however, be interpreted as entirely new money entering India. Jefferies found that through end-July, the net increase in FCNR(B) deposit balances was about 76% of gross mobilisation, indicating that most, but not all, of the money represented net additions. Nomura analysts took a somewhat more conservative approach in its balance-of-payments forecasts, assuming around 35% of FCNR(B) mobilisation represents substitution from other NRI deposits.

Even after allowing for that, the macro impact is large. Nomura expected the surge in capital inflows to help swing India’s overall balance of payments from a $23.6-billion deficit in FY26 to a $66.1-billion surplus in FY27.

Liquidity management: How Rs 7.8L cr inflows shift RBI Monetary Policy focus

Jefferies estimated banking-system liquidity at a surplus of Rs 7.8 trillion as of September 1, aided by the FCNR(B) flows, while Nomura said managing the liquidity created by the scheme would now become one of the RBI’s key challenges.

That is an unusual ending for a programme designed to attract foreign currency. The 2026 FCNR(B) window has succeeded so comprehensively that the conversation has moved from whether India could attract enough dollars to how the RBI manages the abundance they have created.