RBI's Forex Swap Facility: How India Mobilised $73 Billion in Eleven Weeks

On June 8, 2026, the Reserve Bank of India quietly opened a special USD-INR forex swap facility for Foreign Currency Non-Resident Bank deposits, better known as FCNR(B) deposits, along with Overseas Foreign Currency Borrowings (OFCB) and External Commercial Borrowings (ECB). The idea behind the facility was simple enough: absorb the currency-hedging costs that banks would normally have to bear themselves, and in doing so, make it easier for them to offer more attractive deposit rates to Non-Resident Indians.

It worked. According to PIB, interest rates on dollar deposits climbed to between 5.5% and 7.1% per annum, something that hadn't happened since a broadly similar facility was used back in 2013.

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What the Scheme Has Achieved

According to the Ministry of Finance, total foreign exchange inflows under the facility reached $73 billion as of August 21, 2026, all of it coming in under eleven weeks. FCNR(B) deposits were the dominant driver, accounting for $65.40 billion of that total. OFCB contributed $4.86 billion and ECB added $2.59 billion, as per data reported by Business Standard.

To put the scale in context, the 2013 version of this facility, launched during a period of sharp rupee weakness tied to the US Federal Reserve's taper announcement, had raised around $26 billion over roughly three months. The 2026 facility has more than doubled that figure, and in considerably less time.

Why the RBI Closed the Window Early

The response came much sooner than anticipated, and the RBI was duly alerted. The FCNR(B) swaps window is to close earlier than scheduled, on August 31, 2026, rather than September 30, 2026, as the RBI considered that it had reached its objective. The banks will have up to September 11 to execute the eligible swaps with the RBI post the deposit cut-off date of August 31.

According to the PIB, the government pointed out that through attracting large scale and long term deposits from non-residents, India has succeeded in strengthening their external reserves without incurring any extra cost.

How the Swap Mechanism Works

The actual mechanics are not complicated. An NRI puts foreign currency into an FCNR(B) deposit with an Indian bank. The bank then swaps those dollars with the RBI in exchange for rupees. The RBI holds onto the foreign currency, which gets folded into its foreign currency assets, while the bank walks away with rupees it can put to work domestically.

What made 2026 different from 2013 is that the RBI absorbed the hedging cost entirely this time around, rather than just partially. That made it far more commercially viable for banks to go out and mobilise deposits aggressively, since the cost of offering higher rates to depositors was effectively being covered by the central bank.

One thing worth keeping in mind though: the swap comes with a forward obligation attached. The RBI has committed to returning the same dollars to the banks when the deposits eventually mature. So the inflows represent a time-bound improvement in the external position, not a permanent one.

Impact on Forex Reserves and the Rupee

Despite $73 billion flowing in, the rupee has barely moved. It was trading at 95.71 per dollar when the scheme launched on June 8 and closed at the same level on August 21. The reason is straightforward. The dollars coming in have largely been absorbed into the central bank's reserves rather than being made available in the spot market, so the direct exchange rate effect has been limited.

That said, the programme was never purely about the rupee. It gave the RBI a larger cushion of foreign currency to work with when managing volatility, and it has strengthened India's overall external position. Crude oil prices, importer dollar demand and broader global uncertainties have continued to weigh on the currency in the meantime.

As of May 29, 2026, the foreign exchange reserves for India had reached $682.3 billion from a peak level of $728 billion in February 2026. The objective was not that of filling any deficiency in the foreign exchange reserve, as the reserves had been at a comfortable level. The purpose was rather to bring in foreign investments.

Context: 2026 vs 2013

While both have the same underlying framework, there was an entirely different context surrounding the two. The 2013 policy was enacted in the midst of a true currency crisis in India, where the rupee was facing a lot of stress because of outflows from foreign investments. On the other hand, when looking at 2026, it was not a difficult context as there had been consistent selling of stocks by FIIs in India, with the rupee losing 7% during the year.

The other key difference is the cost structure. In 2013, banks still had to absorb part of the hedging expense even with the central bank's support. This time around, that friction was removed entirely, which gave banks a much stronger reason to pass higher rates on to depositors and go after NRI money more aggressively.

Conclusion

In eleven weeks, the RBI's forex swap facility pulled in $73 billion, more than any comparable exercise India has undertaken before. The response from the Indian diaspora, particularly through FCNR(B) deposits, was the backbone of that outcome. The impact on the rupee has been limited so far, with most of the inflows sitting in reserves rather than flowing through to the spot market. The early closure of the window is a reasonable signal that the facility did what it was supposed to do. The bigger question going forward is how smoothly the forward obligations get managed as these deposits begin to mature over the coming years.