MUMBAI: RBI has decided to close the special FCNR(B) scheme a month early on Aug 31 after banks mopped up $52.3 billion in deposits by Aug 13. The central bank’s decision follows a strong response to the facility, which was designed to bring foreign currency into India’s banking system at a time when dollar liquidity was a concern.RBI introduced the special USD-INR forex swap facility on June 8, 2026, covering FCNR(B) deposits, overseas foreign currency borrowings (OFCBs) and external commercial borrowings (ECBs). By Aug 13, banks had reported total inflows of $56.9 billion under the three components. FCNR(B) deposits accounted for $52.3 billion, while OFCBs and ECBs brought in $2.8 billion and $1.7 billion, respectively. Banks can swap the dollars raised with RBI until Sept 11. The facilities for ECBs and OFCBs will continue until Dec 31, as originally planned.
At the heart of the arrangement is RBI’s swap. Banks bring in dollars and RBI provides rupees in exchange.
Under the scheme, foreign banks have in many cases extended financing many times the amount of the initial deposit made by wealthy customers. Bankers said the challenges in deploying the proceeds in fixed-return long-term assets might have prompted the early closure.CS Setty, SBI chairman, said during an analysts’ meet that SBI had mobilised almost $6 billion of FCNR(B) deposits, alongside about $1 billion of OFCBs and $300 million of ECBs. That put total funding raised through the programme at roughly $7.3 billion, most of it through the bank’s foreign offices. Setty had earlier indicated that SBI could raise around $10 billion under the scheme. The proceeds would be used to retire bulk deposits of up to Rs 1 lakh crore.At the heart of the arrangement is RBI’s swap. Banks bring in dollars and RBI provides rupees in exchange. When the swap matures, the transaction is reversed, with the bank returning the rupees and receiving its dollars back. In economic terms, RBI absorbs much of the currency risk for the duration of the deposit, making the arrangement a form of state-provided currency insurance.
