Clipped from: https://www.financialexpress.com/business/banking-finance-rbinbspunlikely-to-revivenbspfcnr-window-4254797/
In 2013, the RBI offered domestic banks a highly subsidised hedging window and mobilised around $30 billion within weeks, helping stabilise the rupee almost immediately. (Photo source: Reuters)
Even though the rupee has approached a critical depreciation threshold, India is unlikely to reopen a special Foreign Currency Non-Resident (Bank) [FCNR(B)] deposit window similar to the one introduced during the 2013 “taper tantrum”, as the country’s forex reserves remain strong and US dollar interest rates are now at record highs.
During the 2013 “taper tantrum”, the US Federal Reserve’s benchmark interest rate was near 0.25%, as the Fed was still following an ultra-loose post-global financial crisis monetary policy. In contrast, the federal funds rate is currently around 4%, following an aggressive tightening cycle to combat inflation. US bond yields are also hovering around record highs of nearly 5%.
Costly NRI deposits
FCNR(B) deposit rates offered by public sector banks currently range between 5.5% and 6%. Any move to mobilise dollar deposits from NRIs would therefore be extremely costly for Indian banks and would likely require substantial subsidisation by the Reserve Bank of India (RBI).
In 2013, the RBI offered domestic banks a highly subsidised hedging window and mobilised around $30 billion within weeks, helping stabilise the rupee almost immediately.
At that time, India’s forex reserves stood at around $275 billion, equivalent to 6–7 months of import cover. Reserves are now about $681 billion, providing roughly 11 months of import cover. This gives India greater flexibility to manage the current situation by supplying dollars from reserves rather than reopening an FCNR(B) mobilisation window.
“When the economy is strong, and financing is not yet a major issue, a special NRI deposit scheme might send the wrong signal to investors,” an official said.
FCNR(B) inflows are also temporary liabilities, and large future maturities can create rollover risks and renewed pressure on both reserves and the rupee, as seen in the previous round.
Panagariya flags costs
Commenting recently on dollar-denominated bonds and high-interest NRI dollar deposits, 16th Finance Commission chairman Arvind Panagariya said: “These are costly instruments that pay significantly higher interest than the rate India earns on its own foreign-currency reserves. It is largely a transfer to rich NRIs.”
Panagariya has urged the RBI to allow the rupee to adjust in response to rising oil-related pressures, arguing that the “psychological barrier” of Rs 100 per dollar should not dictate policy decisions.
The rupee has depreciated about 6% so far in calendar year 2026 and has fallen roughly 11–12% over the past year to record lows, making it one of the worst-performing currencies in Asia. On Friday, the rupee closed at 95 per dollar, up 0.7% from the previous session, its best day since April 2.
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