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Informist, Wednesday, Jun. 10, 2026

 

By Priyasmita Dutta

 

NEW DELHI – The finance ministry will soon hold a meeting with banks and public sector enterprises to discuss the Reserve Bank of India's swap facility to raise fresh foreign currency non-resident deposits, a senior government official said. Finance Minister Nirmala Sitharaman, along with other senior officials, will likely take stock of the progress and the potential inflows following the norms, sources said. 

 

RBI Governor Sanjay Malhotra Friday announced a slew of measures to attract foreign inflows and support the rupee at a time when the Indian currency 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.

 

This mechanism was last deployed in 2013, when 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'.

 

While the government sources said that there was no estimate readily available on how much inflows are expected, market participants said that the tool is expected to draw around $43 billion in inflows. 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%.

 

The rupee has depreciated 6% against the dollar since the war began in West Asia on Feb. 28. It fell to a record low of 96.96 against the dollar on May 20, driven by concerns about a widening current account deficit and persistently high energy import costs due to the war. 

 

India is facing a severe energy crisis, as it has been exposed to energy supply and price shocks due to its dependence on the Persian Gulf for oil and gas. Crude oil prices have soared around 60% following the closure of the Strait of Hormuz since early March. Nearly half of India's crude oil passed through this crucial waterway. Higher energy prices have squeezed India's forex reserves, with New Delhi relying heavily on imports for its huge energy demands. 

 

So far in 2026, FPIs have pulled out $22.75 billion from Indian markets, more than double the $10.92 billion they pulled out in the entire 2025. In 2025-26 (Apr-Mar), the country's net FDI inflows surged to $7.65 billion from $959 million a year earlier. However, in March – when the impact of the West Asia war played out - India saw net foreign direct investment inflows of $1.57 billion, down nearly 65% on month from $4.44 billion in February.  End

 

US$1 = INR 95.27

 

Edited by Avishek Dutta

 

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