The Reserve Bank of India's USD-INR forex swap facility attracted $72.848 billion in total inflows by Aug. 21, 2024 [1].
This surge in liquidity allows the central bank to bolster foreign exchange reserves and provide critical funding to banks through various deposit mechanisms. By mobilizing these currencies, the RBI stabilizes the domestic financial system against external shocks.
Data indicates that Foreign Currency Non-Resident (Bank) deposits, known as FCNR(B), drove the majority of the activity. These deposits alone accounted for $65.397 billion [1]. Other contributions included $4.860 billion from Overseas Foreign Currency Bills (OFCB) [1], and $2.591 billion from External Commercial Borrowings (ECB) [1].
The growth of the facility has been rapid. Inflows stood at $56.8 billion on Aug. 13, 2024 [2], before climbing to the reported $72.848 billion figure a week later [1].
Some reports suggest total inflows reached $72.9 billion by Aug. 21 [2], though official data points to the slightly lower figure of $72.848 billion [1]. This window serves as a strategic tool for the RBI to manage the availability of U.S. dollars within the Indian banking sector.
Market observers expect the facility to continue growing. Projections suggest total inflows could eventually reach between $80 billion and $85 billion [2].
“Total inflows under the swap facility reached $72.848 billion.”
The heavy reliance on FCNR(B) deposits suggests that the RBI is successfully leveraging non-resident Indian capital to strengthen its forex buffer. By using a swap facility rather than direct intervention, the central bank can increase liquidity in the banking system without permanently altering the monetary base, providing a flexible shield against rupee volatility.
