Half of RBI's $127 billion FCNR(B) deposits locked in five-year terms

The RBI's concessional swap scheme has attracted substantial inflows of FCNR(B) deposits, providing the central bank with a stable source of foreign exchange reserves. Governor Malhotra indicated that the five-year tenure structure represents the predominant maturity profile among the deposits mobilised under the facility, suggesting strong investor confidence in the longer-term arrangement.

The concentration of deposits in five-year tenures offers strategic advantages for India's forex management, as it reduces refinancing risks and provides a predictable funding horizon. This maturity distribution also indicates that non-resident Indians and foreign investors view the extended tenure as attractive relative to alternative deployment options in the current interest rate environment.

The FCNR(B) deposit facility remains a crucial instrument for the RBI to augment foreign exchange reserves while managing liquidity in the financial system. The concessional swap structure has incentivised deposits by allowing participating banks to swap foreign currency liabilities into rupees at favourable rates, effectively lowering their borrowing costs while attracting non-resident funds into the Indian banking system.

The successful mobilisation of over $127 billion demonstrates the effectiveness of the RBI's policy toolkit in addressing external financing needs during a period of global economic uncertainty. The predominance of longer-tenure deposits suggests investors are seeking stability and returns in India's financial markets despite ongoing global headwinds.