Foreign currency inflows mobilised under the Reserve Bank of India’s special dollar-rupee swap facility reached $72.85 billion as of August 21, the central bank’s data showed. According to RBI, Foreign Currency Non-Resident (Bank) (FCNR-B) deposits accounted for nearly 90% of the money raised under the scheme.
The data showed that authorised dealer banks reported $65.39 billion in inflows through FCNR(B) deposits under the facility. Overseas Foreign Currency Borrowings (OFCBs) brought in another $4.86 billion, while External Commercial Borrowings (ECBs) contributed $2.59 billion.
The RBI introduced the special USD-INR swap facility on June 8, covering foreign currency inflows raised by banks through FCNR(B) deposits, ECBs and OFCBs. The facility was designed to encourage foreign currency inflows and strengthen the availability of foreign exchange in the domestic financial system.
The mobilisation also brings the RBI closer to the level of inflows it had anticipated from the three schemes. Earlier this week, RBI Governor Sanjay Malhotra told Financial Express that the central bank expected the facilities together to attract at least $80 billion, reflecting strong macroeconomic fundamentals and adding further support to India’s balance of payments.
At $72.85 billion, inflows reported through August 21 are already equivalent to more than 91% of that level.
FCNR(B) window approaches deadline
The strong response comes just days before the FCNR(B) component of the facility closes on August 31. The ECB and OFCB windows will remain available until December 31, leaving room for further foreign currency mobilisation during the rest of the year.
The RBI had earlier advanced the closing date for the FCNR(B) swap window, a move that prompted questions over whether the central bank had changed course.
Malhotra rejected that characterisation. “It will not be correct to call it a U-turn; it is rather a calibration,” he told Financial Express, describing the decision as a response to rapidly evolving conditions.
He said the decision was taken from a “position of strength”, with inflows having exceeded both the RBI’s and most market participants’ expectations.
The governor also pointed to the costs of keeping the window open once substantial dollars had already been mobilised. As the RBI takes in more dollars through swaps, the benefit from each additional dollar declines, while the central bank also has to manage the resulting rupee liquidity for a longer period.
Malhotra described this as a “diminishing marginal utility” from additional dollars being swapped, alongside rising sterilisation costs.
Why the swap facility matters
Under such swap arrangements, banks bringing eligible foreign currency funds into India can exchange those dollars with the RBI for rupees, helping make overseas fund mobilisation more attractive while adding to foreign currency assets in the domestic financial system.
The strong response is particularly visible in FCNR(B) deposits, which allow non-resident Indians to hold deposits in foreign currencies with Indian banks. With $65.397 billion mobilised through the channel by August 21, FCNR(B) deposits have contributed roughly nine out of every 10 dollars attracted under the three components.
Malhotra has also sought to separate the forex mobilisation measures from any attempt to defend a particular level of the rupee. He said the RBI’s forward-dollar position remained “very manageable” and reiterated that the exchange rate remained market determined, with intervention aimed at curbing excessive volatility and speculative activity rather than targeting a specific level.
With the FCNR(B) deadline approaching, the latest data shows the scale of the response to the RBI’s special facility. The longer-running ECB and OFCB windows could now determine whether total mobilisation crosses the central bank’s expectation of at least $80 billion before the scheme winds down.
This article was first uploaded on August twenty-two, twenty twenty-six, at fifty minutes past eight in the night.
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