NEW DELHI: The Reserve Bank of India (RBI) has decided to close the special FCNR(B) deposit window on August 31, a month earlier than initially planned, after banks mobilised $52.3 billion in FCNR(B) deposits by August 13, the central bank said in announcements and reporting cited by banks.
What the scheme raised and why it mattered
The special USD-INR forex swap facility, launched on June 8, 2026, was designed to attract foreign currency into the Indian banking system at a time when dollar liquidity was of policy concern. By August 13, banks had reported total inflows of $56.9 billion under the three components of the facility:
- FCNR(B) deposits: $52.3 billion
- Overseas foreign currency borrowings (OFCBs): $2.8 billion
- External commercial borrowings (ECBs): $1.7 billion
"At the heart of the arrangement is RBI’s swap. Banks bring in dollars and RBI provides rupees in exchange."
The RBI swap arrangement meant banks could convert the dollars they mobilised into rupees with the central bank. When swaps mature, the transactions reverse and banks return the rupees to reclaim their dollars — effectively leaving the RBI to shoulder currency risk for the tenure of the deposit.
Operational timelines and remaining facilities
While the FCNR(B) window will shut on August 31, banks have until September 11 to swap the dollars they have already raised with the RBI. The swap facilities for OFCBs and ECBs will continue as originally scheduled until December 31, the reporting shows.
Bankers cited the strong response to the scheme and challenges in deploying the proceeds into long-term, fixed-return assets as factors behind the early closure. Large inflows in a short span can strain banks' capacity to invest in suitable assets without compressing returns or taking on additional risk.
Bank-level mobilisation and use of proceeds
SBI Chairman CS Setty told analysts that State Bank of India had mobilised almost $6 billion of FCNR(B) deposits, along with about $1 billion of OFCBs and $300 million of ECBs — putting SBI’s total raised through the scheme at roughly $7.3 billion. Setty earlier suggested SBI might raise around $10 billion under the programme.
According to reporting, a primary intended use of the proceeds was to retire bulk rupee deposits of up to ₹1 lakh crore, allowing banks to replace expensive domestic liabilities with foreign-currency funding converted via the RBI swap. By doing so, lenders could manage deposit costs while supporting their foreign currency and liquidity positions.
Why this matters for markets and customers
For the broader economy and market participants, the rapid mobilisation under the scheme and its early closure have several implications:
- Short-term relief for dollar liquidity in the banking system, as a large volume of foreign currency entered India within weeks of the facility’s launch.
- Potential reduction in pressure on banks’ cost of funds if expensive rupee deposits are retired using the proceeds.
- Temporary transfer of currency risk to the RBI via the swap, which reduces immediate exchange-rate exposure for participating banks until swaps mature.
For depositors and corporates, the move does not change existing FCNR(B), OFCB or ECB contracts already entered; it affects only the availability of the special window for fresh mobilisations under the FCNR(B) leg. Banks will continue to honour contracted terms and can complete swaps for dollars raised until September 11.
The RBI’s decision underscores the substantial private-sector appetite for foreign-currency deposits when incentivised by a sovereign swap arrangement. It also highlights the central bank’s active role in managing FX liquidity and smoothing adjustments in the currency and banking markets.
What it means for you: If you are an overseas depositor or a bank customer considering similar foreign-currency products, the early closure indicates the window for such state-facilitated, large-scale offers can close quickly once targets are met. For domestic borrowers and depositors, the move may modestly influence banks’ funding costs and deposit strategies over the coming months as institutions redeploy or retire rupee liabilities using the scheme’s proceeds.
