The Reserve Bank of India will bear the swap cost for FCNR(B) deposits mobilized up to Aug. 31 [1].
This move accelerates the closure of the facility, which was originally scheduled to end on Sept. 30. By absorbing these costs, the central bank aims to encourage further foreign-currency inflows during the final weeks of the window.
The decision follows a strong response to the concessional foreign-exchange swap facility [1]. According to the RBI, banks have raised $56.85 billion [4] under the broader forex-inflow scheme, which includes FCNR(B), External Commercial Borrowings (ECB), and Overseas Foreign Currency Borrowings (OFCB) [2].
Data shows the facility has already drawn significant capital. As of July 31, inflows under the facility reached $40.816 billion [3]. Foreign Currency Non-Resident (Bank) deposits, known as FCNR(B), have been the primary driver of this growth, contributing over 90% of that July figure [5].
Other reports indicate that deposits specifically under the swap scheme have reached $52 billion [1]. The total amount raised across all inflows in the scheme is cited between $56.8 billion [2] and $56.85 billion [4].
The RBI said the decision to bear the swap costs is intended to maintain the momentum of these inflows before the updated deadline [1]. The facility remains open for new deposits until the end of August.
“The RBI will bear the swap cost for FCNR(B) deposits mobilized up to Aug. 31.”
The RBI's decision to subsidize swap costs while simultaneously shortening the window suggests the central bank has reached a significant portion of its liquidity targets. By incentivizing a final surge of FCNR(B) deposits, India is strengthening its foreign exchange reserves to buffer against global market volatility and stabilize the rupee.
