RBI’s Special Swap Scheme Draws Over $100 Billion in Inflows

The Reserve Bank of India’s special foreign-currency swap facility has attracted more than $100 billion in inflows, according to a news reports. The response has been stronger than the earlier estimate of around $80 billion across FCNR(B), ECB and OFCB routes. 

The FCNR(B) window closed on August 31, but banks can still use the RBI’s swap facility for deposits that had already been contracted until September 11. 

FCNR(B) Deposits Make Up Most of the Inflows 

RBI data available up to August 21 showed that the three routes had brought in $72.85 billion. FCNR(B) deposits accounted for the biggest share at $65.4 billion, followed by OFCBs at $4.86 billion and ECBs at $2.59 billion. 

ECB and OFCB Routes Remain Open 

While the FCNR(B) window has now closed, the routes for External Commercial Borrowings (ECBs) and Overseas Foreign Currency Borrowings (OFCBs) will remain open until December 31, 2026. 

The RBI had operationalised the special swap facility on June 8, while FCNR(B) inflows began on June 23. 

Why did the RBI Close the FCNR(B) Window Early? 

The RBI decided to close it a month earlier after the response was stronger than expected. 

The scheme offered tax-free returns on dollar-denominated deposits made by non-resident Indians, which helped attract funds through the route. 

RBI Governor Explains the Decision 

RBI Governor Sanjay Malhotra told the Financial Times that the early closure was a planned response to changing market conditions. 

He also pointed to the rising cost of handling additional dollar inflows. According to the report, the benefit from each additional dollar being swapped falls over time, while the cost of managing the resulting liquidity increases. 

Impact on India’s External Position 

The large FCNR(B) inflows are expected to support India’s balance of payments during the current financial year. This comes after the country’s foreign exchange reserves declined by about $8 billion during the April-June quarter. 

Estimates cited in the report suggest that India’s capital account surplus could cross $65 billion this financial year, compared with deficits recorded in the previous two financial years. 

Read More: Madhya Pradesh to Develop Aerocity Near Indore Airport With ₹600 Crore Investment 

Conclusion 

The RBI’s special swap facility has attracted more funds than initially estimated, with FCNR(B) deposits accounting for the largest portion. The FCNR(B) window closed on August 31, while ECB and OFCB routes will remain available until December 31, 2026. 

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