RBI Opens Special Forex Window, Aims to Draw Up to $50 Billion in Overseas Funds

The Reserve Bank of India (RBI) has introduced a package of measures designed to encourage foreign currency inflows, with the central bank agreeing to absorb exchange-rate risk on select foreign currency deposits and overseas borrowings. The initiatives are expected to strengthen external buffers and support liquidity at a time of heightened volatility in global currency and energy markets.

Under the new framework, the RBI will provide a concessional swap facility for Foreign Currency Non-Resident Bank [FCNR(B)] deposits and eligible overseas borrowings mobilised within specified timelines. The central bank is expected to cut funding costs for banks and make foreign currency deposits more attractive to non-resident investors by taking on the currency risk of these transactions.

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According to RBI guidelines, FCNR(B) deposits with maturities of three to five years will qualify for the facility. In addition, such deposits will be exempt from Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) requirements, reducing the regulatory cost of raising these funds.

Concessional Swap Facility for Overseas Borrowings

The central bank has also extended support for External Commercial Borrowings (ECBs) and Overseas Foreign Currency Borrowings (OFCBs) undertaken by public sector entities. RBI Governor Sanjay Malhotra said the concessional swap arrangement for ECBs is intended for public sector undertakings, noting that benefits from lower borrowing costs would ultimately flow to infrastructure and utility sectors.

The RBI has fixed the swap premium at 1.5% annually, compounded semi-annually, for eligible ECB and OFCB transactions. Under the mechanism, authorised dealer banks will sell dollars to the RBI at prevailing benchmark rates and repurchase them at maturity after paying the applicable premium.

The FCNR(B) swap window will remain available for deposits mobilised up to September 30, 2026, with the facility continuing until October 16, 2026. The ECB and OFCB swap facility will remain operational until January 15, 2027, for drawdowns completed by December 31, 2026.

Regulatory Relief for Participating Banks

The RBI has also provided regulatory flexibility by excluding swap positions created under these facilities from net open position calculations. This allows banks to participate in the programme without affecting regulatory exposure limits under foreign exchange management rules.
FCNR(B) deposits mobilised under the scheme will carry a one-year lock-in period on premature withdrawals.

Move Aimed at Strengthening External Funding

Banking industry estimates cited in public reports suggest the combined measures could attract nearly $50 billion through FCNR(B) deposits and overseas borrowings. The initiatives come shortly after the RBI announced additional steps to encourage foreign participation in India’s financial markets and expand access to government securities for overseas investors.

With global capital flows becoming increasingly sensitive to geopolitical developments and interest-rate movements, the latest measures are aimed at improving access to foreign currency funding while enhancing the country’s external financing position.