RBI To Close FCNR(B) Scheme Early After $52.30 Billion Inflows

The Reserve Bank of India (RBI) will close its special window for foreign currency non-resident or FCNR(B) deposits on August 31, 2026, a month earlier than planned, after banks raised $52.30 billion from overseas Indians by August 13. The facility was originally scheduled to remain open until September 30. The RBI said on August 14 that it was bringing forward the deadline following the “encouraging response” and strong foreign exchange inflows.

Including overseas foreign currency borrowings (OFCBs) and external commercial borrowings (ECBs), total inflows under the measures stood at $56.85 billion as on August 13. 

The RBI announced the measures on June 8 to bring more foreign currency into the banking system amid pressure on the rupee and tight dollar liquidity. Under the arrangement, banks raise foreign currency deposits from non-resident Indians (NRIs) nd swap the dollars with the RBI for rupees.

The RBI bears the currency-hedging cost for banks under the special FCNR(B) facility. Banks can also borrow against the deposits, making it easier to attract large foreign currency deposits.

The strong response has prompted banks to offer attractive rates on FCNR(B) deposits, with some lenders offering up to 7.75 per cent on five-year deposits.

The early closure could affect the bond market in the near term. The rupee liquidity generated through the swaps has supported demand for government bonds, particularly short-term securities. The five-year government bond yield has fallen about 47 basis points (bps) since June, compared with a 25 bps decline in the 10-year yield.

The impact on the rupee is expected to be limited, with currency movements currently driven more by crude oil prices and geopolitical developments.

The FCNR(B) window will close on August 31, but banks can swap the dollars raised under the scheme with the RBI until September 11. The facilities for OFCBs and ECBs will continue until December 31.