RBI USD-INR Forex Swap: 1.5% Rate Until Dec 2026

What RBI announced on June 8

The Reserve Bank of India (RBI) on June 8 introduced a US Dollar-Rupee forex swap facility to support external commercial borrowings (ECBs) by public sector undertakings (PSUs) and overseas foreign currency borrowings (OFCBs) by banks. The RBI move follows Governor Sanjay Malhotra’s statement on June 5 that signalled easing of norms for overseas borrowings by state-run enterprises. The facility is structured as a swap window where banks can exchange US dollars and rupees with the central bank for a fixed cost.

The RBI’s circular sets out eligibility conditions, operational mechanics, and a defined timeline for drawdowns and the facility’s availability period. Importantly, the circular also lists categories of borrowings that are excluded from the window. The announcement comes amid a broader set of measures referenced in reports as aimed at attracting foreign currency inflows.

Who can use the swap facility

The RBI said the facility will be open from June 8 until December 31, 2026 for two categories of foreign currency borrowings.

First, it covers ECBs of three years’ average maturity and above raised by PSUs. Second, it includes OFCBs of minimum three-year maturity raised by Authorised Dealer Category-I banks. These maturity thresholds are part of the eligibility conditions to access the swap window.

The circular also clarifies the facility’s scope in terms of timing. It applies to drawdowns made up to December 31, 2026. While drawdowns are capped at that date, the window itself will remain open until January 15, 2027.

How the USD-INR swap works operationally

Under the arrangement described by RBI, banks can sell US dollars to the RBI at the FBIL Reference Rate. The bank then buys the dollars back at the end of the swap period. Transactions are to be conducted in multiples of one million US dollars.

The mechanism effectively allows eligible entities to raise foreign currency funds and manage currency exposure through a swap with the central bank, rather than relying only on market swap pricing. The RBI’s circular is positioned as an operational framework for eligible ECBs and OFCBs, with the bank acting as the executing counterparty with RBI.

Pricing, tenor, and compounding details

A key feature of the facility is the fixed pricing. The swap carries a fixed rate of 1.5 percent per annum, compounded semi-annually. The RBI also set a maximum tenor of five years.

These parameters matter because they define the maximum duration of hedging support and the fixed cost of the swap over that period. Compounding semi-annually is explicitly specified in the circular, which is relevant for calculating the effective cost over longer tenors. The cap of five years limits how long participants can stay in the swap under this facility.

Borrowings excluded from the window

The RBI circular excludes specific types of transactions from the facility. Borrowings with embedded options are not eligible. ECBs raised to refinance existing debt are also excluded.

These exclusions narrow the facility’s use to certain types of fresh external fundraising, rather than allowing participants to use the swap window for refinancing transactions. The RBI’s stated coverage, as per the circular, is tied to qualifying ECBs and OFCBs that meet the maturity criteria and other conditions.

Key dates and eligibility snapshot

The RBI’s circular includes a clear timeline for drawdowns and the facility’s end date, alongside the maturity requirements. The following table summarises the main operational facts that were explicitly stated.

How reports framed the PSU-focused concessional swap

Separate reporting around RBI’s measures described a concessional foreign exchange swap facility for PSUs aimed at reducing hedging costs on foreign currency loans. These reports said the measure is designed to encourage PSUs to raise funds through ECBs and support foreign currency inflows.

Business Standard, citing a Barclays report, described the “PSU ECB swap facility” as offering incentives for PSUs to borrow in US dollars and swap into rupees, similar to the 2013 RBI FX swap window. Reports also said RBI would issue a detailed circular on how the mechanism will be operational.

One report said the concessional swap facility would be available until September 30, 2026. In addition, reports said state-owned enterprises could step up overseas borrowings in FY27, with ECB issuances potentially crossing $15 billion in the financial year, citing a funding-cost advantage of around 3 percent under the latest measures.

What analysts and research notes said

A Barclays report was quoted as saying the facility may see an uptake of around $10-15 billion over the next few months, while noting that demand could be constrained because global rates are still elevated. SBI Research, according to reports, said the concessional forex swap facility to incentivise ECB issuances by PSUs should accelerate such borrowings in overseas markets.

An IDFC Bank report was also cited as saying that, while details were yet to be released at that time, it was expected to attract inflows assuming a significant discount on forex swaps. These comments, as reported, focus on potential adoption and the importance of swap pricing versus market levels.

Earlier RBI swap windows mentioned in the broader context

The material also referenced earlier RBI swap operations and windows. On February 21, 2025, RBI announced a long-term USD/INR buy/sell swap of $10 billion for a tenor of three years starting February 25, 2025, aimed at meeting durable liquidity needs. It was described as RBI’s second swap auction of 2025, following a $1 billion swap with a tenor of six months held on January 31, 2025.

Separately, the text referenced an earlier period when RBI had received about $15 billion from special concessional swap windows for deposits by non-resident Indians and overseas foreign currency borrowings by banks, with the facility open till November 30 in that instance.

Why the June 8 swap facility matters for markets

The June 8 framework sets out a fixed-rate, time-bound channel for eligible foreign currency borrowings to be swapped into rupees through RBI. For PSUs considering ECBs and banks raising OFCBs within the maturity limits, the key market variable is the fixed 1.5 percent per annum swap rate stated in the circular. The design also standardises execution through FBIL Reference Rate-based transactions and a minimum transaction size multiple of $1 million.

At the same time, the exclusions for embedded options and refinancing ECBs indicate RBI is directing the window towards specific borrowing profiles. The dates are also central for planning, since drawdowns must be completed by December 31, 2026, while the facility remains open until January 15, 2027.

Conclusion

RBI’s June 8 USD-INR forex swap facility provides a defined, fixed-rate swap window for PSU ECBs and eligible bank OFCBs, with a maximum tenor of five years and a 1.5 percent per annum rate compounded semi-annually. The circular lays down maturity thresholds, operational rules tied to the FBIL Reference Rate, and exclusions for embedded-option borrowings and refinancing ECBs. The next operational focus will be on utilisation within the drawdown timeline ending December 31, 2026, with the window staying open until January 15, 2027.