RBI's forex swap window draws record $65bn in FCNR deposits

Foreign Currency Non-Resident (FCNR(B)) deposits have emerged as the dominant source of inflows under the RBI's forex swap facility, accounting for $65.39 billion of the total mobilisation. The rush reflects efforts by financial institutions to tap overseas rupee deposits before the August 31 deadline imposed by the central bank for this particular window.

The facility, which allows banks to swap foreign currency deposits for rupees, has proven instrumental in managing India's forex liquidity and strengthening the rupee. Financial institutions have prioritised FCNR(B) deposits given their shorter maturity profile and the regulatory deadline driving participation.

Beyond FCNR(B) deposits, the RBI's swap facility encompasses External Commercial Borrowings (ECB) and Overseas Foreign Currency Bonds (OFCB), which together account for the remaining portion of the $72.85 billion total. Unlike the FCNR(B) window, both ECB and OFCB facilities remain operational until December 31, providing longer windows for mobilisation.

The substantial inflows underscore strong demand from overseas investors and foreign currency account holders seeking to participate in India's forex market through the structured window. The facility continues to serve as a critical instrument for the RBI's forex management operations and currency market stabilisation efforts.