RBI FCNR(B) swap could draw $55-70bn inflows in FY27

What the RBI changed and why it matters

The Reserve Bank of India has opened a special dollar-rupee forex swap facility to encourage banks to mobilise fresh Foreign Currency Non-Resident (Bank) deposits, or FCNR(B), from overseas depositors. The facility applies to deposits raised for tenures of three to five years and is available for mobilisation up to September 30, 2026, with banks able to access the swap window until October 16, 2026. Deposits raised under the scheme carry a one-year lock-in period, and banks have to use non-cancellable swaps.

The stated objective, as reflected in multiple reports, is to attract foreign currency inflows, support the rupee, and ease funding pressures in the financial system. The RBI also acknowledged that FCNR(B) inflows have weakened materially over the past year, prompting the need for an incentive structure.

How the swap facility works for banks

Under the arrangement, authorised dealer banks can swap fresh and renewed FCNR(B) deposits with the RBI at a concessional rate. A central feature is that the RBI absorbs the full hedging costs for banks mobilising these fresh FCNR(B) deposits. This reduces the cost for banks of offering competitive dollar deposit rates to overseas customers while managing currency risk.

Separately, the RBI’s measures also include swap windows linked to external commercial borrowings (ECBs) and other foreign borrowing routes by state-owned companies. These combined measures are being positioned as an attempt to increase the availability of foreign currency and manage volatility in the currency market.

CRR and SLR treatment after conversion to rupees

For the period up to September 30, banks can raise FCNR(B) deposits for three to five years. Once these are converted into rupees, there will be no requirement to carve out reserves under the cash reserve ratio (CRR) and statutory liquidity ratio (SLR) provisions. That regulatory relief can improve the effective economics for banks, because it reduces the amount that must be parked as mandatory reserves when the funds are deployed domestically.

What rating agencies and banks are projecting on inflows

India Ratings and Research (Ind-Ra) said the RBI’s forex swap measures on FCNR(B) deposits and ECBs could attract $10-70 billion in foreign capital and support the rupee. Ind-Ra also flagged FCNR(B) as a likely key channel for mobilising foreign capital because the RBI is bearing hedging costs, allowing banks to offer better returns to overseas depositors.

SBI Research, in its Ecowrap report, estimated total potential inflows of $15-65 billion in FY27. It split this into $10-45 billion via FCNR(B) deposits and another $15-20 billion through ECB/FCCB/OFCB swap windows.

Separately, Punjab National Bank CEO Ashok Chandra said Indian banks anticipate raising $15-$10 billion through foreign currency deposits under the RBI-backed scheme, reflecting industry expectations that the scheme will translate into meaningful mobilisation.

The 2013 parallel and what’s different this time

SBI Research drew a parallel to the 2013 FCNR(B) mobilisation exercise, when about $14.5 billion flowed into FCNR(B) deposits in three months. In the current scheme, the window is longer, and SBI Research said that could lift potential inflows to $10-45 billion through FCNR(B) alone.

At the same time, some commentary notes that the rate differential between India and the US is much narrower than it was in 2013. That difference matters because the ultimate depositor proposition depends on how much incremental dollar return banks can offer after factoring in market alternatives.

Where FCNR(B) deposit rates stand today

FCNR(B) dollar deposit rates were described as varying across banks and maturities. For one- to two-year deposits, rates were cited at around 3.85% to 5% across major banks, with Bank of Baroda offering up to 5%, SBI and Kotak Mahindra Bank around 4.40%, Axis Bank up to 4%, ICICI Bank up to 3.85%, and HDFC Bank up to 3.95%.

For three- to five-year deposits, rates were cited at around 2.95% to 3.65% across major banks. SBI and Bank of Baroda were cited up to 3.35% for 3-5 years, Kotak Mahindra Bank up to 3.4%, ICICI and Axis Bank up to 3.25%, and HDFC Bank at 3.65%.

Some experts estimate that if banks pass on the benefit of the RBI’s hedging-cost support, rates could potentially rise toward 6% to 6.5%, though no bank had announced revised rates at the time of the report.

Why the RBI is focusing on FCNR(B) right now

During the June 2026 monetary policy committee (MPC) meeting, the RBI acknowledged a sharp drop in FCNR(B) inflows. Inflows fell from over $1 billion in FY25 to $146 million in FY26. The concessional swap facility is being used to address that decline by making FCNR(B) mobilisation more attractive for banks and depositors.

SBI Research also cited that, as of March 2026, outstanding FCNR(B) deposits stood at $13.8 billion. That stock provides context on the size of the market the RBI is targeting and why a policy push could move the needle on system-level foreign currency liquidity.

Key numbers at a glance

Market impact: rupee support and banking system funding

The stated market impact of these measures is centred on increasing foreign currency inflows, which can support foreign exchange reserves and provide a buffer to the rupee during volatile periods. Ind-Ra explicitly linked the expected $10-70 billion inflows to a meaningful buffer for the rupee and easing broader funding pressures.

SBI Research also said these measures could help push the balance of payments into surplus and narrow the banking system’s credit-deposit gap. The combination of FCNR(B) mobilisation and swap windows for foreign borrowings aims to improve the availability of foreign currency and reduce pressure points in domestic funding.

Analysis: what to watch over the next few months

The key variable is pass-through. The RBI is covering hedging costs, but the depositor decision will depend on how much higher banks push FCNR(B) deposit rates versus existing alternatives. SBI Research cited a range of 5.5-6% as potentially offerable by banks, compared with current three-year US Treasury yields of around 4.2%, framing the competitiveness argument in rate terms.

Another monitorable point is timing. The deposit mobilisation deadline of September 30, 2026, and swap access window until October 16, 2026, create a defined period in which the impact should become visible through banking flows and reported FCNR(B) mobilisation data.

Conclusion

The RBI’s new swap facility for fresh 3-5 year FCNR(B) deposits, combined with swap windows for foreign borrowings, is being widely projected to attract large inflows, with estimates ranging from $15 billion to $10 billion in FY27. The next data points will be whether banks raise FCNR(B) rates meaningfully and how quickly inflows build during the window that runs until September 30, 2026, with swap usage available until October 16, 2026.