RBI FCNR(B) swap window rules: what banks get till 2026

What the RBI announced and why it matters

The Reserve Bank of India (RBI) has launched a US dollar-rupee forex swap facility for fresh Foreign Currency Non-Resident (Bank), or FCNR(B), deposits with maturities of three to five years. The measure was announced by RBI Governor Sanjay Malhotra in the monetary policy statement on June 5 as part of steps to attract foreign capital and support the rupee. Under the scheme, the central bank will bear the full hedging cost for banks mobilising eligible deposits until September 30, 2026. The swap window comes into effect immediately and remains open until October 16, 2026, for deposits mobilised between the date of the RBI circular and September 30, 2026. The RBI also indicated that banks will get additional flexibility, including that NOP-INR limits will not apply for these flows. The package also includes a concessional forex swap window for public sector undertakings (PSUs) raising external commercial borrowings (ECBs) and other measures aimed at improving foreign exchange inflows.

Who can use the FCNR(B) swap facility

The facility is available to authorised dealer category-I banks. It applies to eligible FCNR(B) deposits mobilised in any freely convertible currency, including deposits renewed upon maturity. However, swaps with the RBI will be undertaken only in US dollars. Banks are free to price such deposits according to internal policies, subject to existing regulatory ceilings. The RBI clarified that the tenor of the swap will align with the tenor of the underlying deposits. The underlying deposits must have a minimum tenor of three years and a maximum tenor of five years to qualify. The operational design is intended to make it simpler for banks to raise foreign currency deposits without taking on the full cost of hedging those inflows.

Key operational rules in the RBI circular

Banks can access the swap facility only once a week. In any given week, the maximum amount eligible for swapping equals all eligible FCNR(B) deposits mobilised in equivalent US dollar terms during the preceding week, or preceding weeks where the facility was not availed earlier. Transactions will be done in multiples of $1 million. In the first leg of the swap, the bank sells US dollars to the RBI at the FBIL Reference Rate, with spot settlement. The second leg takes place at the same rate as the first leg. The RBI said the swap will be undertaken at par.

How non-dollar FCNR(B) deposits will be treated

For FCNR(B) deposits mobilised in permissible foreign currencies other than the US dollar, banks may determine the equivalent US dollar amount eligible for swapping. This conversion must be done at prevailing market rates on the day of the swap transaction. The RBI asked banks to follow a consistent policy for such conversions, and to maintain proper documentation and audit trails. While the deposit can be in a freely convertible currency, the RBI’s swap leg is structured only in US dollars. This design allows the RBI to standardise the swap operation while still letting banks mobilise deposits in multiple foreign currencies.

Lock-in, premature withdrawal and cancellation rules

The underlying FCNR(B) deposits will have a one-year lock-in period. Banks may, at their discretion, allow premature withdrawal after one year, in line with internal policies. But swaps undertaken with the RBI cannot be cancelled. This separation between deposit withdrawal terms and the swap’s non-cancellable nature is a key operational detail for treasury and liquidity teams at banks. It also reinforces that the RBI wants certainty over the swap book created under the facility.

CRR and SLR exemptions on eligible FCNR(B) deposits

The RBI said that fresh FCNR(B) deposits of minimum tenor of three years and maximum tenor of five years mobilised by banks until September 30, 2026, including renewed deposits, will be exempted from maintenance of CRR and SLR. This exemption reduces the balance-sheet cost of raising these liabilities compared with deposits that attract reserve requirements. Combined with the RBI bearing the hedging cost, the measure is designed to make mobilising FCNR(B) deposits more attractive for banks.

PSU and CPSE ECB swap window: what is changing

Alongside the deposit swap window, the RBI announced a concessional foreign exchange swap facility to incentivise external commercial borrowings (ECBs), particularly by PSUs and central public sector enterprises (CPSEs). The RBI extended the concessional forex swap window for ECBs raised by PSUs till September 30, 2026. Barclays said in a report that the PSU ECB swap facility will offer incentives for PSUs to borrow in US dollars through ECBs and swap into rupees, similar to the 2013 RBI FX swap window. Separately, state-owned enterprises are expected by market participants to step up overseas borrowings in FY27, with ECB issuances potentially crossing $15 billion, aided by a reported funding-cost advantage of around 3 per cent under the latest measures.

Other linked steps: export proceeds timeline

The RBI also restored the time limit for realisation of export proceeds to nine months from 15 months. This change is part of the broader set of measures aimed at managing foreign exchange inflows and the overall external sector environment. In the same wider communication set around the measures, the RBI and the government also announced steps related to bond investment routes and other capital-flow related rules. These announcements were framed as an effort to improve the flow of foreign capital and support currency stability.

What markets are watching: fine print and possible inflow expectations

Market participants linked the FCNR(B) swap window and the PSU ECB swap window to potential near-term dollar inflows. Dealers cited expectations that these measures together could draw almost $10 billion-$10 billion of foreign inflows over the next four to five months, with the FCNR(B) window seen as a likely source of $10 billion-$15 billion and the PSU ECB facility around $10 billion-$15 billion. These are market estimates rather than RBI projections. Separately, commentary on the earlier FCNR(B) swap window introduced during the 2013 taper tantrum suggested the outcome depends on the fine print, including whether leverage is permitted and whether regulatory relaxations similar to those offered in 2013 are extended.

Key terms at a glance

Historical context: the 2013 FCNR(B) window

A previous FCNR(B) window, referenced in current market discussions, was used during the 2013 “taper tantrum” period to shore up foreign exchange inflows. In that earlier arrangement, banks could swap fresh dollar funds at a fixed rate of 3.5 per cent a year for the tenure of the deposit, according to reported details from that episode. The RBI also provided other swap options, including for fresh borrowings against Tier-I capital at one per cent less than market rates. In one update from that period, the RBI reported receiving $12.7 billion under the special concessional window to swap fresh FCNR(B) deposits and foreign currency borrowings, with both swap windows open till November 30. The current facility differs in its stated design and timing, but investors and treasuries continue to compare uptake and operational conditions with the earlier programme.

Conclusion

The RBI’s new FCNR(B) swap facility sets out clear rules on eligibility, weekly access, conversion for non-dollar deposits, lock-in conditions, and the non-cancellable nature of swaps. With CRR and SLR exemptions and the RBI bearing full hedging cost on eligible inflows until September 30, 2026, banks have stronger incentives to mobilise 3-5 year foreign currency deposits. In parallel, the concessional forex swap window for PSU ECBs is designed to encourage overseas borrowings and dollar inflows through September 30, 2026. The next set of market focus points is likely to be weekly participation by banks, the pace of deposit mobilisation, and the utilisation of the ECB swap window by PSUs within the stated timelines.