Uday Kotak Suggests Relaunching FCNR(B) Scheme To Stabilise Rupee

Drawing parallel to the 1998 Asian financial crisis, when then-RBI Governor Bimal Jalan imposed strict measures to protect the rupee, Kotak suggested that similar “emergency-style” steps may be needed again.

He hinted that the central bank could look at reintroducing the Foreign Currency Non-Resident (Bank) scheme FCNR (B) scheme to help strengthen the depreciating rupee and stabilise the currency market.

The Indian rupee has fallen by more than 11 per cent in the current financial year with 5.5 per cent depreciation coming in just the current quarter due to rising oil prices, strengthening dollar amid foreign investor outflows.

Kotak who is also the founder and director at Kotak Mahindra Bank in a tweet referring to the ongoing war between the US-Israel and Iran said that the "Middle East situation is now in an uncharted territory. That leads to unconventional policy actions. A move on sharp reduction of Indian bank’s open fx positions in a short period seems to be in that category. Reminds me of Bimal Jalan play book as RBI Governor in 1998 when the ₹ was depreciating sharply post Asian crisis."

"If things get worse geo politically, is there an opportunity for a new version of FCNR( B) scheme?," he added.

He said that the central bank's move on Friday ordering banks acting as authorised dealers to limit their end of the day open positions in the onshore rupee to $100 million is one of the unconventional policy actions. Authorised dealers have been asked to comply with the requirement by April 10, 2026.

FCNR(B) scheme which attracts dollar deposits from NRIs with high interest rates to boost reserves has been experimented by the central bank during several crises to stabilise the rupee. For instance introduced in 2013 by the then governor Raghuram Rajan, when the rupee had plunged to a life-time low and was in a free-fall due to the US ‘taper tantrums’, the country mobilised USD 26 billion through (FCNR-B) deposits by offering a special swap window for banks.

Anil Bhansali, head treasury at Finrex Trading Advisors said, "The FCNR (B) scheme was introduced 13 years ago and did have an impact of $26 billion of inflows as the rupee strengthened from 68 to a dollar to Rs 59. The RBI sweetened it by allowing them a lower saving bank rate at that time from the market thus inviting lot of inflows.However once the inflows stopped, the rupee again started depreciating."