RBI forex swaps to pull $65 bn, lift BoP in FY27 surplus

RBI measures in focus as rupee pressure builds

A new SBI Ecowrap report argues that the Reserve Bank of India’s recent foreign exchange measures could materially improve India’s external finances in FY27. The key idea is straightforward: encourage fresh foreign currency inflows through special swap facilities linked to FCNR(B) deposits and external borrowing routes. SBI Research pegs incremental inflows at $15 billion to $15 billion in FY27, with some economists putting the potential as high as $10 billion. If these flows arrive as expected, the report says they can ease pressure on the rupee, support forex reserves, and change the balance of payments outlook.

What SBI Research says could change in FY27

SBI Research expects India to continue running a current account deficit (CAD) in FY27. But it estimates the CAD can be “comfortably financed” by the inflows generated through the RBI’s latest initiatives. Importantly, SBI now expects the overall balance of payments (BoP) to shift to a surplus of $1 billion to $10 billion in FY27. That is a sharp reversal from its earlier estimate of a $15 billion to $10 billion BoP deficit for FY27. Market participants cited in the report context also see potential for a BoP surplus of at least $1 billion to $10 billion.

The two main channels: FCNR(B) and ECB/OFCB

The SBI note breaks the expected inflows into two broad buckets. The first is Foreign Currency Non-Resident (Bank) deposits or FCNR(B). SBI Research estimates FCNR(B) deposits could mobilise $10 billion to $15 billion, supported by attractive deposit rates and the RBI’s dollar-rupee swap facility.

The second bucket is external commercial borrowings (ECBs) and overseas foreign currency borrowing (OFCB). SBI Research estimates $15 billion to $10 billion could come through the ECB/OFCB swap route. The mechanism is expected to work through lower hedging costs, which can make overseas borrowing more attractive for companies and banks and improve dollar liquidity in the market.

How the RBI’s swap windows are expected to work

The measures referenced in the report include special swap facilities that encourage banks and borrowers to bring in dollars, while managing hedging costs through the RBI’s swap arrangements. One part of the plan described in the provided material is that the RBI would cover complete hedging expenses for banks seeking to attract new 3 to 5-year FCNR(B) deposits. Another part is a favourable foreign exchange swap arrangement to encourage ECBs, including by public sector undertakings (PSUs).

SBI Research frames these steps as a coordinated set of actions that can spur dollar inflows, support reserves accretion, and stabilise the currency. The emphasis across the notes is on liquidity and cost of hedging, because those two factors often determine whether inflows appear quickly or remain theoretical.

Balance of payments: from projected deficit to possible surplus

SBI Research’s standout claim is the BoP swing. It now expects FY27 BoP to be in a surplus range of $1 billion to $10 billion. Previously, it had estimated a deficit of $15 billion to $10 billion.

Separately, another set of estimates cited in the provided material suggested the BoP deficit could widen to $15 billion in the current fiscal from $15 billion in the last fiscal year. There is also a reference to a full-year BoP posting a narrower shortfall of -$13.6 billion versus an estimate of -$15.5 billion. Taken together, these figures underline why policymakers and market participants are focused on securing stable foreign currency inflows.

Current account deficit stays, but financing looks easier

Even under SBI Research’s more constructive BoP view, India is still expected to run a current account deficit in FY27. SBI places the FY27 CAD in a 1.5% to 1.7% of GDP range. The implication is that a steady capital inflow pipeline could offset the current account gap without forcing sharp currency adjustment.

Another research view cited is from Barclays economists, who said coordinated policy efforts could deliver a sizable capital account surplus of $105 billion in FY27, yielding a BoP surplus and reducing the need for “outsized depreciation” fears. This is consistent with the broader point that a larger capital account cushion can reduce the probability of abrupt rupee moves.

Rupee and liquidity expectations from the same set of measures

On the currency, SBI Research is described as being optimistic that the rupee can rise back to the Rs 92 per dollar level in the near term once the flows start coming in. More generally, economists cited in the report context said these measures could ease pressure on the rupee and soften sharp, unpredictable moves if the projected $10 billion to $10 billion flows materialise.

SBI also links the inflows to the RBI’s ability to manage volatility through stronger foreign exchange reserves. The report argues that a stronger external account position and higher reserves would enhance the central bank’s capacity to smooth currency market swings.

Banking system implications mentioned by SBI

Beyond external accounts, the SBI material also points to domestic banking system effects if FCNR(B) flows come in at scale. It mentions a possible rise in bank deposit growth to around 14.5% to 15% in FY27, against a projected credit growth of 16%. It also notes that the credit-deposit ratio in FY27 could decline to less than 2%, from a high of 6.7% in FY24. These are presented as outcomes tied to improved deposit mobilisation from foreign currency inflows.

Key numbers snapshot

Why this matters for markets and policy

The core market relevance is that large, policy-supported inflows can change the external financing narrative in a short time. A BoP surplus, even a modest $1 billion to $10 billion, can reduce stress around reserve drawdowns and rupee volatility when global dollar conditions tighten. For policymakers, the emphasis is on making the CAD easier to finance while maintaining orderly currency trading conditions.

The next signposts will be whether FCNR(B) deposit mobilisation matches the $10 billion to $15 billion expectation and whether overseas borrowing flows respond meaningfully to lower hedging costs. SBI’s thesis depends on both legs working together, with FCNR(B) doing the heavy lifting and the ECB/OFCB window adding incremental liquidity.

Conclusion

SBI Research expects the RBI’s FCNR(B) and foreign borrowing swap measures to attract $15 billion to $15 billion of inflows in FY27, potentially shifting India’s BoP to a $1 billion to $10 billion surplus despite a CAD of 1.5% to 1.7% of GDP. If the inflows build as projected, SBI says forex reserves and rupee stability could improve, with markets watching the pace at which these flows start “trickling in” across FY27.