FCNR(B) offers window to stabilise economy, but repayment challenges await

Uday Kotak, chairman of Kotak Mahindra Bank, cautioned that while the Foreign Currency Non-Resident (Bank) scheme has provided India valuable breathing room, the nation must act decisively to address underlying vulnerabilities. Speaking at the Business Standard BFSI Insight Summit 2026, Kotak underscored that the FCNR(B) framework has effectively purchased a three to five-year window for policymakers to fortify the country's macroeconomic foundations and financial stability.

The FCNR(B) scheme allows non-resident Indians and persons of Indian origin to deposit foreign currency with Indian banks, offering attractive interest rates while helping shore up forex reserves. However, Kotak's remarks highlight growing concerns within financial circles about the sustainability of these inflows and the obligations they entail.

The banker's comments underscore a broader debate about India's external sector dynamics. While the FCNR(B) has bolstered reserves and provided short-term relief, analysts and policymakers are increasingly focused on ensuring that the reprieve is deployed effectively to strengthen structural aspects of the economy, including fiscal discipline, current account management, and productivity improvements.

Kotak's assessment reflects a measured view among India's financial leadership: the scheme functions as a useful policy tool, but cannot substitute for comprehensive economic reforms. The warning serves as a reminder that India's window for decisive action, while meaningful, remains finite.