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Informist, Tuesday, Jun. 23, 2026

 

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--RBI releases FAQs on swap facility for FCNR (B) deposits, FX loans 
--RBI: Banks can give loans to non-residents against FCNR deposit
--RBI: Banks can hedge interest component of FCNR deposits 
--RBI: Diffential deposit rates on FCNR only allowed on basis on tenor, size
--RBI: Bks can give FCNR deposit without lock-in if not availing swap window 
--RBI:Concessional swap window only for 5 yrs no matter max period of FX loan

 

NEW DELHI - The Reserve Bank of India Tuesday released responses to frequently asked questions on its swap facility for foreign currency non-resident deposits, external commercial borrowings and overseas foreign currency borrowings that was put in place Jun. 8. The clarification allows banks to leverage the deposits freely, which is likely to lead to higher inflows while also offering higher returns to depositors. 

 

The RBI allowed Indian banks, including their overseas branches, to extend loans to non-residents or issue a stand-by letter of credit in favour of overseas lenders against FCNR (B) deposits mobilised under the scheme. After banks offer a loan overseas to an account holder, the lending institution can mark a lien on such deposits, the regulator said. 

 

The central bank had announced a slew of measures on Jun. 5 to attract foreign capital into India, including the measures noted above. The RBI is covering the entire hedging cost of banks' fresh three-to-five year FCNR (B) deposits raised until Sept. 30. It is also offering a concessional hedging rate of 1.50% per annum for external commercial borrowings from public-sector undertakings and overseas foreign currency borrowings by authorised dealer banks through its swap facilities. 

 

Further, the central bank clarified that the swap facility will cover only the principal amount of the banks' deposits and not the interest component. 

 

The RBI said banks will be allowed to undertake swaps for tenors of less than three years provided they have mobilised fresh eligible FCNR (B) deposits for a minimum original tenor of three years as per the scheme.

 

Under the RBI's swap window, banks' underlying FCNR(B) deposits will have a lock-in period of one year and the banks may, at their discretion, allow premature withdrawal of such deposits after one year, as per their internal policy. However, swaps undertaken with the RBI cannot be cancelled.

 

Further, the central bank said that banks can offer differential interest rates on term deposits under the FCNR (B) scheme only on the basis of tenor of deposits and size of deposits. 

 

Banks can continue to offer regular FCNR (B) deposits, without availing the RBI's swap facility, for customer deposits with a tenor of three to five years, without the requirement of a minimum lock-in period of one year. However, records shall be maintained separately, it said. 

 

Further, the central bank clarified that while external commercial borrowings can be raised for any tenor, its concessional swap facility for external commercial borrowing is only for a maximum period of five years.  End

 

Reported by Pratiksha and Aaryan Khanna

Edited by Deepshikha Bhardwaj

 

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