RBI forex swap window 2026: FCNR(B) and ECB relief

What the RBI announced and why it matters

The Reserve Bank of India (RBI) has launched a US dollar-rupee forex swap facility aimed at supporting fresh foreign currency inflows into the banking system. The facility is designed around two channels mentioned in the announcements: fresh Foreign Currency Non-Resident (Bank), or FCNR(B), deposits and eligible External Commercial Borrowings (ECBs) raised by public sector undertakings (PSUs). The RBI said the FCNR(B) window is for deposits with maturities of three to five years. It also clarified that banks are free to price such deposits as per internal policies, within existing regulatory ceilings.

The measures were positioned as a response to pressure on the rupee and the need to bolster forex funding sources. The broader context cited includes an outflow of $13.7 billion by foreign institutional investors in less than two months and the consequent fall in the rupee. Alongside the swap facilities, the RBI also partially withdrew earlier restrictions on non-deliverable INR derivatives, while retaining guardrails around related-party transactions.

FCNR(B) forex swap facility: eligibility and tenor

Under the RBI’s framework, authorised dealer banks raising fresh FCNR(B) deposits with a minimum tenor of three years and a maximum tenor of five years can access the forex swap facility. The RBI’s communication also states that deposits renewed upon maturity are included, provided they meet the defined mobilisation period. The swap facility comes into effect immediately.

A key feature highlighted is that the RBI bears the full hedging cost on eligible inflows under this facility. In operational terms, this shifts the hedge cost burden away from banks for the specified deposits during the eligible window. The announcement also reiterates that banks can price the deposits as per internal policy, subject to ceilings that already exist under regulation.

Key dates and operational window for FCNR(B) deposits

The RBI said the swap facility for FCNR(B) deposits will remain open until October 16, 2026, for deposits mobilised between the date of the circular and September 30, 2026. Separately, the measures note that full hedging-cost support is extended for banks raising three- to five-year FCNR(B) deposits till September 30, 2026.

The communications also mention that the swap facility with the RBI cannot be cancelled. That clause matters for treasury and risk teams because it reduces uncertainty about the availability of the hedge once the position is entered through the RBI window. The rules also allow banks to exclude swap positions arising out of FCNR(B) deposits while computing net open rupee position.

CRR and SLR exemptions for eligible FCNR(B) inflows

In addition to the swap window, the RBI said that fresh FCNR(B) deposits of minimum tenor of three years and maximum tenor of five years mobilised until September 30, 2026 will be exempted from maintenance of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). This includes deposits that are renewed upon maturity, as per the RBI’s wording.

CRR and SLR exemptions can change the economics of deposit mobilisation for banks because they reduce the proportion of deposits that must be maintained as reserves and specified liquid assets. The RBI’s stated intent across these measures is to boost forex funding sources and mitigate rupee volatility.

Concessional forex swap for PSU ECBs: what is covered

To encourage overseas borrowing, the RBI said it would provide a concessional foreign-exchange swap facility until September 30, 2026 for ECBs raised by PSUs. The text also states that external commercial borrowings of average maturity of three years and above by public sector undertakings will be eligible for the RBI swap facility.

A separate operational detail provided is that the swap facility comes into effect from today and will remain open up to January 15, 2027 for eligible ECB drawdowns. As with FCNR(B), banks may exclude swap positions arising out of ECBs while computing the net open rupee position.

Other capital flow measures cited alongside the swap window

The measures described span government securities, foreign portfolio investment, overseas Indian equity investments, ECBs by PSUs, FCNR(B) deposits, and export proceeds realisation norms. One policy change cited is an ordinance dated June 5, 2026 that exempts interest earned as well as capital gains on transfer, sale or exchange of government securities (G-secs) held by a Foreign Institutional Investor or a Bank for International Settlements, with effect from April 1, 2026.

The text also mentions the expectation that concessional forex swap relief for PSU ECBs could increase ECBs from the usual $10-12 billion to $15 billion, while noting that the operational framework is yet to be issued. On FCNR(B), it states banks may be able to raise up to $10 billion, linked to the hedging-cost support for fresh deposits till September 30, 2026. These are presented as expected outcomes within the supplied material rather than confirmed results.

INR derivatives: RBI partially withdraws April 1 restrictions

Separately, the RBI partially withdrew directives taken on April 1 to curb excessive speculation in the rupee. Under the revised directives effective immediately, authorised dealers can resume offering non-deliverable derivative contracts involving INR to resident or non-resident users.

However, the RBI said authorised dealers shall not undertake any foreign exchange derivative contract involving Indian rupee with their related parties. The RBI also described exceptions that enable authorised dealers to undertake cancellation and rollover of existing contracts, and transactions undertaken with non-related non-resident users on a back-to-back basis.

Export proceeds realisation period reset

Among the measures listed, the RBI restored the export proceeds realisation period to nine months from 15 months. This change affects the compliance timeline for exporters and is part of the wider set of steps described as supporting forex inflows and managing currency volatility.

Summary table: what is open, what is eligible

Market impact factors highlighted in the announcements

The announcements directly connect the package of measures to pressures on forex flows and the rupee, referencing a $13.7 billion foreign institutional investor outflow in less than two months. Within the text, the RBI’s swap and hedging-cost measures are described as aimed at attracting foreign capital and boosting forex funding sources.

For banks, the combination of the RBI bearing full hedging cost on eligible FCNR(B) inflows and the CRR/SLR exemption changes the cost structure of mobilising three- to five-year foreign currency deposits. For PSUs, the concessional swap facility is framed as relief because the cost of forex swaps can reduce the advantage of foreign borrowings. In the derivatives market, the RBI’s revised instructions restore the ability to offer INR non-deliverable derivatives to users, while restricting related-party activity and allowing specified exceptions.

Analysis: why the design choices matter

The RBI’s design focuses on tenor and defined windows, rather than open-ended support. For FCNR(B), the three- to five-year maturity condition is paired with a cut-off date for mobilisation, and a separate last date for the facility to remain open. The “cannot be cancelled” clause and the net open rupee position treatment are operational details that directly affect treasury risk management and reporting.

On ECBs, specifying an average maturity of three years and above for PSUs narrows the facility to longer-term borrowing. The additional note that the window remains open up to January 15, 2027 for eligible drawdowns adds clarity for borrowers and banks on execution timelines. And by loosening INR non-deliverable derivative restrictions while tightening related-party constraints, the RBI appears to be balancing market functioning with controls aimed at reducing speculative excess, based on the stated purpose of the earlier April 1 steps.

Conclusion

The RBI’s latest package combines a US dollar-rupee swap window for fresh three- to five-year FCNR(B) deposits, concessional swap support for eligible PSU ECBs, and targeted relaxations on INR non-deliverable derivatives. The FCNR(B) swap facility is effective immediately and remains open until October 16, 2026 for deposits mobilised till September 30, 2026, while eligible PSU ECB drawdowns are covered up to January 15, 2027 as stated. The next key reference points will be banks’ mobilisation activity during the eligible periods and any further operational clarifications on the ECB framework noted as pending in the supplied material.