RBI's Forex Swap Draws $ 137.4 Billion Largely Through FCNR (B) Deposits

Mumbai: Banks have mobilised a whopping $136.4 billion under the Reserve Bank of India’s (RBI) special foreign currency deposit and borrowing schemes announced in June. Of this amount $ 127.23 billion have been mobilised through the FCNR(B) deposits under the facility according to provisional data released by the RBI on Wednesday.

Overseas Foreign-currency borrowings (OFCBs) brought in $5.260 billion, while external commercial borrowings (ECBs) contributed $3.891 billion.

The RBI had announced the USD-INR Forex Swap facility covering FCNR(B) deposits, External commercial borrowings (ECBs) and Overseas foreign currency borrowings (OFCB) inflows on June 8, 2026 to attract dollar flows and shield the falling rupee. The FCNR (B) scheme was open till August 31, 2026. For ECBs and OFCBs the scheme is open till December 31, 2026.

Meanwhile, several top banks such as HDFC Bank, ICICI Bank, SBI, Punjab National Bank, Axis Bank, Kotak Bank have slashed their FCNR (B) deposit interest rates after the RBI’s deadline for the special swap window offer ended on August 31, 2026. The rate cuts effective September 1 have particularly been made in deposits of three to five years, which had higher interest rates after the RBI announced a relief on hedging costs.

The latest figures are provisional and subject to final reporting, accounting, and reconciliation, the RBI said.

According to analysts, FCNR(B) deposits are providing a significant liquidity boost to Indian banks, but the sizeable inflows could also create a new challenge on the asset side — finding profitable avenues to deploy the incremental liquidity.

“The exceptionally strong response from the overseas depositors has led to sizeable FCNR(B) inflows of USD 127.2 billion which has significantly bolstered the liquidity buffers of the banks. However, given the magnitude of these inflows, its profitable deployment is likely to take some time and could intensify competition for quality borrowers. Meanwhile, the near-term impact could be lower loan yields and some moderation in margins,”said Sachin Sachdeva, Vice President & Co-group Head, Financial Sector Ratings, ICRA.

According to Madhavi Arora, lead economist at Emkay Global, the higher-than-expected special USD-INR Forex Swap facility mobilisation of ~$137 billion could help the core banking system liquidity peak above Rs 10 lakh crore in September requiring the RBI to deploy some durable liquidity-absorption tools including forex shorter tenor sell-buy swaps and Market Stabilisation Scheme or even Incremental Cash Reserve Ratio (though less likely).

The RBI may also be comfortable now taking delivery of their ~$32 billion forward book which is due to maturing in one year given the liquidity influx. This could naturally take some liquidity pressure off.

“That said, it is important to recognise that this represents a future dollar-denominated debt liability, with an indirect fiscal cost through lower RBI dividends -- potentially amounting to Rs one lakh crore plus cumulatively. The funds raised therefore need to be deployed judiciously and productively to mitigate these first-order costs,” said Arora.