FCNR(B) Scheme: Banks eye $50bn inflows by Aug 2026

Banks say mobilisation could beat the RBI deadline

Indian banks and market participants expect a sharp rise in foreign currency non-resident (bank) deposits, with the industry increasingly confident of reaching the $10 billion mobilisation target well before the Reserve Bank of India’s September timeline. Bankers cited improving demand and said the $10 billion mark could be hit in about 45 days, implying progress by August. The expectation follows the RBI’s latest package of measures designed to shore up foreign currency inflows and support external sector stability.

A treasury head at a mid-sized public sector bank said the $10 billion target appears achievable if current incentives remain in place. Banks have also pointed to the relative attractiveness of FCNR(B) pricing compared with domestic rupee deposit rates, which is helping improve customer response. The RBI’s window for the special scheme remains open until September 30, 2026.

What the RBI changed to attract foreign currency inflows

The RBI introduced multiple steps earlier this month to support capital inflows. These include hedging cost support for FCNR(B) deposits, a concessional swap window on external commercial borrowings (ECBs) by public sector units, and inclusion of ultra-long tenor bonds under the fully-accessible route (FAR). The intent is to make foreign currency fundraising cheaper and more predictable for banks and eligible borrowers.

The relaxation is temporary and is positioned as a response to a global environment where interest rates remain elevated. The measures also come at a time when the rupee has faced pressure from volatile oil prices and uncertain global economic conditions. By lowering hedging and funding frictions, the package aims to improve inflow momentum during the limited window ending September 30, 2026.

Why banks are pushing FCNR(B) deposits now

Bankers say incentives offered under the RBI’s framework are translating into competitive deposit products. Schemes effective from June 2026 offer interest rates up to 6.50% per annum for tenures of three to five years, with a one-year lock-in period. Large private sector lenders have moved quickly to raise FCNR(B) deposit rates to capitalise on renewed NRI interest.

The RBI has also exempted incremental FCNR(B) deposits from cash reserve ratio (CRR) and statutory liquidity ratio (SLR) requirements, according to the information provided. Banks are also able to use swap facilities, which can reduce uncertainty and costs associated with managing currency risk. Together, these changes are expected to reshape competition for deposits, favouring lenders with strong overseas networks and established NRI customer bases.

Cost advantage: hedging support and annual savings estimates

A key attraction for banks is the economics of raising foreign currency deposits when hedging costs are supported. Banks are expected to save around ₹4,000 crore annually by raising deposits through FCNR(B) accounts, as the RBI covers hedging costs, making them cheaper than domestic fixed deposits, according to the article’s estimates.

One line in the information provided notes that the RBI will hedge foreign borrowings for 1.5% per annum to protect banks from rate fluctuation risk. This support mechanism is central to why bankers believe the product can be scaled quickly over the coming weeks, particularly if banks market it aggressively and maintain current pricing.

Bank-level plans: Bank of India’s $1.5 billion raise

Bank of India has outlined a plan to raise about $1.5 billion through foreign currency deposits and overseas borrowings, leveraging the RBI measures. The bank’s plan includes $1 billion from FCNR(B) deposits and $1.5 billion through concessional swap facilities.

The bank expects the strategy to reduce borrowing costs by 50 to 60 basis points. This illustrates how the RBI’s swap and hedging framework is being used not only for deposit mobilisation but also to optimise the funding mix and reduce overall cost of funds where possible.

Estimates vary, but the $15–50 billion band is repeated

Forecasts for FCNR(B) inflows differ across stakeholders, but several estimates cluster in the $15 billion to $10 billion range. Industry experts anticipate $15 billion to $15 billion in FCNR(B) inflows, which would provide liquidity relief to banks that are dealing with deposit growth challenges. Another estimate says the RBI’s special FCNR(B) scheme could bring $15 billion to $10 billion of fresh deposits over the coming months.

Punjab National Bank Managing Director and CEO Ashok Chandra estimated that Indian banks could collectively mobilise $15 billion to $10 billion under the scheme. Other lenders have projected inflows of $10 billion to $10 billion, while some analysts believe the figure could exceed $10 billion if banks aggressively market the product.

SBI expects $10 billion to $15 billion of inflows through this route, according to the details provided. Separately, Japanese brokerage Nomura pegged likely inflows at $15 billion, with the bulk expected in August and September, based on various estimates cited.

How 2026 compares with the 2013 programme

The 2026 framework is described as going further than the earlier episode, citing more supportive hedging terms, broader eligibility and potential use of leverage. The leverage feature is highlighted as a key reason inflows in 2026 could match or exceed the levels achieved in 2013 despite a less stressed macroeconomic environment.

The original programme mobilised about $14 billion, stated as around 13% of India’s foreign exchange reserves at that time. The current reserve base is noted as exceeding $180 billion. Against that backdrop, the article argues that inflows of $10 billion to $10 billion do not appear implausible under a successful execution scenario.

Outstanding base and why competition may intensify

Outstanding FCNR(B) deposits stood at about $13.8 billion at the end of March 2026. With industry estimates suggesting inflows of $15 billion to $10 billion under the current window, the initiative could become one of the largest foreign currency deposit mobilisation exercises since the RBI’s 2013 programme.

Because the scheme is time-bound and pricing has moved quickly, competition is expected to intensify across banks. The article notes that banks with strong NRI franchises and overseas distribution may capture a larger share of these flows. For lenders facing pressure to fund robust credit growth, incremental foreign currency deposits may offer a near-term liquidity bridge.

Rupee context: crude prices, inflows, and range talk

The rupee outlook is also discussed in the context of expected inflows and macro drivers. The information provided says the rupee is poised for appreciation, supported by a significant drop in crude oil prices and anticipated inflows from NRI FCNR(B) deposits. It also states that recent tax reforms are expected to attract $10 billion to $10 billion, potentially reversing recent depreciation and pushing the currency towards 92 to 93 levels.

Market experts including Nischal Maheshwari are cited as believing the initiative could attract more than $10 billion in foreign currency inflows, providing a cushion against external volatility and easing funding pressures. But the material also includes a cautionary view from Mythili Bhusnurmath, Senior Journalist and former Editor at Financial Express, against placing excessive faith in estimates projecting $10 billion to $10 billion of inflows.

Key numbers at a glance

Why the story matters for bank funding and liquidity

For banks, the core relevance is the potential to raise sizeable foreign currency liabilities at a lower effective cost than certain domestic alternatives. The article frames FCNR(B) mobilisation as a liquidity relief lever at a time when credit growth remains robust and deposit growth is a challenge for parts of the sector. Lower hedging costs, CRR/SLR exemptions on incremental balances, and swap facilities together lower the hurdle rate for participation.

The scale matters as well. With outstanding FCNR(B) deposits at $13.8 billion as of March 2026, incremental flows of $15 billion to $10 billion would materially change the composition and availability of bank funding for the period, even if unevenly distributed across lenders. The outcome will likely depend on pricing discipline, execution, and how aggressively banks market the product during the limited window.

Conclusion

Banks are positioning the RBI’s FCNR(B) incentives as a short, high-impact window to mobilise foreign currency deposits, with several estimates ranging from $15 billion to $10 billion and some projections running higher. Bankers expect the $10 billion target could be met by August, ahead of the September timeline, provided current incentives remain in place. With the relaxation in force until September 30, 2026, the next key datapoints will be weekly or monthly mobilisation trends and how much of the projected inflows materialise during August and September.