FCNR(B) inflows cross $100 billion, far exceeding RBI's $80-billion estimate

Record Inflows Surpass RBI's Projection

Capital inflows under India's Foreign Currency Non-Resident (Bank), or FCNR(B), deposit scheme crossed $100 billion by the August 31 deadline, according to official sources cited by The Financial Express. The figure far exceeds the Reserve Bank of India's (RBI) earlier projection of $80 billion across three special foreign-currency funding routes, which also include external commercial borrowings (ECBs) and overseas foreign currency borrowings (OFCBs).

The milestone follows the RBI's decision in June to open a special dollar-rupee swap facility to encourage banks to mobilise foreign-currency deposits from non-resident Indians (NRIs). The facility was operationalised on June 8, and FCNR(B) inflows began on June 23.

The unusually strong response prompted the central bank to close the FCNR(B) window a month ahead of its original September 30 deadline. RBI data available until August 21 showed inflows under the three schemes at $72.85 billion, comprising $65.4 billion through FCNR(B), $4.86 billion through OFCBs, and $2.59 billion via ECBs.

The FCNR(B) scheme allows NRIs to hold deposits with Indian banks in foreign currencies. For depositors, the arrangement provides exposure to a foreign currency while offering tax-free returns; for banks, it provides a source of foreign-currency funding.

RBI's Stated Rationale for Early Closure

RBI Governor Sanjay Malhotra described the decision to close the FCNR(B) window early as a "well-thought-out, calibrated, prudent and data-driven" response. He elaborated on the reasoning in an interview with The Financial Express, noting that "there is a diminishing marginal utility of every dollar that is swapped... increasing marginal cost because you need to sterilise it for a longer period."

The early closure was also linked to concerns over reversal risks associated with excessive inflows. Banks can continue to avail themselves of the swap facility for FCNR(B) deposits that had already been contracted until September 11. The ECB and OFCB windows, however, will remain open until December 31, 2026.

The swap deposits have a minimum maturity of three years and a maximum maturity of five years, with most inflows coming under the five-year category.

Impact on Balance of Payments and Forex Reserves

Officials have highlighted the positive implications of the inflows for India's external finances. Chief Economic Adviser V Anantha Nageswaran said the successful mobilisation of FCNR deposits provides strong support for India's balance of payments and provides a floor for the rupee.

Estimates suggest the capital account surplus could rise above $65 billion in the current financial year, reversing the deficits recorded in the previous two financial years.

The foreign currency assets received through the swaps will be reflected on the RBI's balance sheet, potentially providing an additional boost to India's forex reserves, which stood at a record $729.33 billion in the week ended August 21. This comes despite an $8-billion depletion in foreign exchange reserves during the April-June quarter.

The inflows have also strengthened the RBI's ability to intervene in the foreign exchange market. The rupee appreciated for a fourth consecutive session on Tuesday, rising 22 paise to 94.95 against the dollar, helped by central bank intervention. The rupee had touched a record low of 96.96 per US dollar in May 2026 amid the West Asia conflict.