More Stories

Informist, Tuesday, Jun. 9, 2026

 

By Pratiksha

 

NEW DELHI – The Reserve Bank of India's swap facility for banks to raise fresh foreign currency non-resident deposits, a tool last deployed in 2013, is expected to draw around $43 billion in inflows, according to the median of estimates from 16 market participants polled by Informist. The lowest estimate for the quantum of inflow was $20 billion, while the highest was $60 billion. 

 

RBI Governor Sanjay Malhotra Friday announced a slew of measures to attract foreign inflows and support the rupee at a time when India is grappling with its worst crisis in over a decade. Among the various measures he announced was a facility to cover the full hedging costs for banks raising fresh three- to five-year FCNR(B) deposits till Sept. 30. The swap facility that came into effect on Monday will remain open till Oct. 16 for deposits mobilised between Jun. 8 and Sept. 30.

 

"The FCNR(B) window is the biggest takeaway for the rupee, in my opinion. I am expecting around $50 billion of inflows from the RBI's FCNR(B) deposit window if the geopolitical environment stabilises. These measures should support the rupee," Nitin Agarwal, head of trading at ANZ Bank India, said.

 

In 2013, then RBI governor Raghuram Rajan had announced an FCNR deposit window to attract inflows. The scheme, under which the RBI had swapped dollars raised by banks via FCNR deposits at concessional rates, successfully mobilised about $26 billion, helping stem the rupee's fall, which was then reeling under the 'Taper Tantrum'.

 

Market participants said the current scheme could prove even more attractive for banks, as the RBI is bearing the full cost of hedging and exempting deposits from the statutory liquidity ratio and cash reserve ratio requirements. During the 2013 programme, the central bank had capped hedging support at 3.5%.

 

"Zero swap cost due to RBI's concession, no CRR/SLR on these deposits and concessional rates on NRIs' borrowing are likely to provide a decent return for NRIs and lower borrowing costs for banks compared to a three-year domestic deposit," Upasna Bhardwaj, chief economist at Kotak Mahindra Bank, said in a note.

 

The RBI's detailed notification on the scheme, issued on Monday, showed that the central bank has enabled banks to offer leverage to clients for such deposits, potentially resulting in more inflows, market participants said. Leverage makes it easier for overseas banks to extend credit to NRIs who place borrowed funds as FCNR deposits. According to market participants, the 2013 scheme's success relied heavily on NRIs' ability to leverage their capital by 10–20 times through standby letters of credit issued by Indian banks.

 

Market participants said the current scheme will also be attractive due to the longer tenure of the mobilised deposit. The 2013 window was for FCNR deposits maturing in three years, while the one announced now covers deposits maturing in three to five years. "The sharp 2016 redemption cycle underscores the importance of longer tenor FCNR(B) deposits, as longer maturities reduce rollover risk and enhance the stability," Soumya Kanti Ghosh, group chief economic adviser at State Bank of India, said in a note. "We believe a 5-year FCNR(B) deposit provides a longer and more predictable source of foreign currency funding than a 3-year deposit." 

 

Further, the exclusion of FCNR(B) deposit swap positions from banks' net open position limits increases the scheme's scalability by removing an important balance sheet constraint and increasing confidence in take-up, Barclays said in a note. On Mar. 27, the central bank directed banks to ensure that net open rupee positions in the onshore market do not exceed $100 ‌million at the end of each business day. 

 

The central bank said that the underlying FCNR(B) deposits would have a one-year lock-in period, limiting the scope for a quick reversal of flows. 

 

HURDLES TO SUCCESS

While most factors suggest the scheme could attract substantial inflows, some market participants cautioned that demand for the facility may be constrained as global interest rates are still elevated. 

 

"... the backdrop of higher global yields and softer domestic rates compared to 2013 is a key reason. RBI activated this scheme after sharp rate hikes in 2013 and that provided an attractive opportunity to banks to deploy funds in domestic short-end assets," Abhishek Upadhyay, co-head research at ICICI Securities Primary Dealership, said in a note. "In contrast, RBI MPC has still not tightened monetary policy this time. It is plausible that the lack of yield pick-up in domestic assets may not dissuade some domestic banks that have been struggling with the high cost of funds," he added. 

 

Analysts at MUFG Bank said that, with short-end US rates much higher at around 4% and longer-end INR yields relatively lower at around 6.4% for five-year tenors, the economics are less attractive than in 2013. "This is both because FCNR(B) rates have to rise sufficiently to compensate for higher US dollar deposit rates, and also because borrowing to leverage up makes less sense given the higher cost of funds both for banks and for NRIs," they added. 

 

Overall, market participants said these steps, along with other measures taken by the RBI and the government, are likely to lead to a one-time capital flow boost to help finance and contain external sector pressures in 2026-27 (Apr-Mar) and anchor the Indian currency. They expect banks to operationalise the FCNR(B) deposit facility on their end within three-seven days. 

 

POLL DETAILS

 

Participant	Estimate (in billion dollars)
ANZ Bank	50
State Bank of India	34
Emkay Global Financial Services Ltd.	50-55
Barclays	25-30
Axis Securities	30-50
CSB Bank	40-50
Kotak Mahindra Bank	40-50
ICICI-Securities Primary Dealership	50
IDFC FIRST Bank	40
PGIM Mutual Fund	30-40
ICICI Bank	50
YES Bank	35-40
RBL Bank	50
Standard Chartered Bank	25-30
South Indian Bank	60
MUFG Bank	20
Median	42.5

 

End

 

US$1 = INR 95.35

 

Edited by Avishek Dutta

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

 

Informist Media Tel +91 (11) 4220-1000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2026. All rights reserved.