Summary:
The RBI will keep its special FCNR(B) deposit window open until September 30, 2026, as strong NRI participation has helped attract $40.8 billion in foreign currency inflows within 53 days. The scheme supports India's forex reserves, strengthens the balance of payments, and eases pressure on the rupee by allowing banks to raise FCNR(B) deposits at lower hedging costs. The RBI expects the liquidity impact to remain temporary while reinforcing confidence in India's external position.
The Reserve Bank of India has ruled out both an early closure and an extension of its special Foreign Currency Non-Resident (Bank), or FCNR(B), deposit window, indicating that foreign currency inflows remain healthy. RBI Governor Sanjay Malhotra said the central bank sees no reason to prematurely close the facility, which will remain available for eligible FCNR(B) deposits until September 30, 2026. The decision signals confidence in India’s external-sector position despite continued pressure on the rupee.
What Is the Special FCNR(B) Scheme?
The RBI announced the special facility on June 5, 2026, and operationalised it from June 8 to attract foreign currency into India. Under the scheme, banks can mobilise fresh or renewed FCNR(B) deposits with maturities of 3-5 years and swap the foreign currency with the RBI at a concessional rate. The facility reduces currency-hedging costs for banks, enabling them to offer more attractive deposit rates to NRIs.
The FCNR(B) window will close on September 30, while similar concessional facilities for External Commercial Borrowings and Overseas Foreign Currency Borrowings will remain available until December 31, 2026.
What is FCNR?
Foreign Inflows Reach $40.8 Billion in Just 53 Days
The response has been significantly stronger than initially expected. In just 53 days, India mobilised approximately $40.8 billion through the RBI’s special swap facilities by the end of July. This was almost double the $20.7 billion mobilised as of July 17.
FCNR(B) deposits accounted for roughly 90% of the total mobilisation, underlining strong NRI participation. Earlier, by July 17, banks had already raised $17.4 billion through FCNR(B) deposits, alongside around $2 billion through overseas foreign currency borrowings and more than $1.3 billion through external commercial borrowings.
Why Is the RBI Attracting More Dollars?
The programme is intended to strengthen India’s balance of payments, add to the foreign-exchange buffer and reduce pressure on the rupee. Estimates cited in the report now put India’s FY27 balance-of-payments surplus at around $40 billion, revised upwards from $25 billion earlier.
This is important because capital inflows had weakened considerably. India’s capital-account surplus stood at around 0.4% of GDP in FY25 and just 0.1% in FY26, while the FY26 current-account deficit was about 0.8% of GDP. The rupee had consequently depreciated around 11% despite a relatively manageable current-account deficit.
RBI's Big move towards attracting Foreign Capital
Liquidity Impact Expected to Be Temporary
The large dollar inflows also inject rupee liquidity when banks swap these funds with the RBI. However, the central bank expects this liquidity impact to be temporary rather than permanent. Stronger reserves should provide the RBI with greater flexibility to manage excessive currency volatility, although the central bank has reiterated that it does not target any particular rupee level.
