Indian banks have raised $17.40 billion in fresh dollar deposits in the first six weeks of a Reserve Bank of India window built to defend a sliding rupee, according to central bank data released Monday. The scheme runs until September 30, 2026, and banks were originally expected to pull in more than $50 billion by then. The early pace puts the industry within striking distance of that number, but only if the back half of the window outperforms the front half.
The same $17.40 billion is also doing a second job nobody designed the scheme to do. Credit growth at Indian banks is outrunning deposit growth by the widest margin in years, and this particular dollar product happens to be exempt from the very rules that make ordinary deposits expensive to hold.
$17.4 Billion In, With a Steeper Climb Still Ahead
The Reserve Bank of India (RBI) operationalised the special window on June 8, 2026, and by July 17 had collected data showing $17.40 billion mobilised through fresh three to five year Foreign Currency Non-Resident, or FCNR(B), deposits. Reviewing the data provided by authorised dealer banks, the central bank noted the immediate efficacy of the framework, saying the swap facility has seen avid interest and attracted steady forex inflows since June 8, 2026.
Two companion schemes rode alongside it. Overseas Foreign Currency Borrowings (OFCB) brought in $1.97 billion and External Commercial Borrowings (ECB) added $1.34 billion, pushing the combined haul across all three routes to $20.71 billion in the same stretch.
- FCNR(B) deposits – $17.40 billion raised, window for fresh deposits closes September 30, 2026, bank access to the RBI swap runs to October 16, 2026
- Overseas Foreign Currency Borrowings – $1.97 billion raised by banks, part of the same concessional package
- External Commercial Borrowings – $1.34 billion raised, mainly by public sector undertakings, with facilities open into the rest of the year
Punjab National Bank MD and CEO Ashok Chandra was asked directly whether the industry can still reach $50 billion. “I believe it will,” he said. “Most of the inflows across the industry are likely to come during the latter half of August and September, so I am optimistic that the overall target can be achieved.” That is a bet on concentration, not steady accumulation, and it lines up with how NRI remittance patterns typically cluster around the festive season back home.
Why the Central Bank Never Called $50 Billion a Target
The $50 billion figure that anchors most coverage of this scheme, including expectations that banks were originally expected to raise over that amount, did not come from the RBI itself. When the facility was unveiled on June 5, Governor Sanjay Malhotra was explicit about that. “We have not set any target, but we hope to receive healthy and large-scale inflows through the measures announced on Friday,” he said at the time.
The numbers now circulating trace back to analysts, not the regulator. Nomura has estimated the scheme could attract $55 billion, with a large share landing in August and September. Bank of America separately calculated that applying the 2013 scheme’s deposit penetration rate to today’s larger FCNR(B) base would imply potential inflows of around $55 billion to $60 billion. Different math, similar destination, and neither figure is an official benchmark the RBI has to hit.
Inside the Swap That Moves Currency Risk Onto the RBI’s Books
The mechanics explain why banks moved so fast. A bank takes in a dollar deposit from an NRI, then sells those dollars to the RBI at the prevailing reference rate and agrees to buy them back at the identical rate when the deposit matures. Because the rate is fixed at both ends, the bank carries no exchange risk if the rupee weakens over the deposit’s life. The RBI absorbs that risk instead.
Before this window, banks paid roughly 3% a year to hedge that same exposure in the open market, a cost that ate directly into what they could offer depositors. Removing it created room for rates 150 to 200 basis points higher than pre-scheme levels. Fresh deposits raised under the scheme also carry an exemption from Cash Reserve Ratio and Statutory Liquidity Ratio requirements, a provision that overrides standard credit facility directions for this specific pool of money, meaning the entire deposit becomes lendable rather than partly locked up.
Banks repriced within days. AU Small Finance Bank moved its peak dollar FCNR(B) rate from 5.15% to 7.10%, a jump that JM Financial’s own client note flagged as one of the sharpest reactions among lenders that quickly revised their FCNR(B) rates once the circular landed. Kotak Mahindra Bank folded its own updated dollar rates into effect from June 11, part of a wave of lenders that priced eligible deposits under the new swap terms within days of the announcement.
Credit Growth Is Outrunning Deposits by 5.3 Points
Here is the problem the scheme is quietly solving. Scheduled commercial banks grew credit 18.6% for the fortnight ended June 30, 2026, while deposits grew just 13.3% over the same stretch. Since FY23, credit growth has consistently surpassed deposit growth, according to SBI Research, resulting in a gap that has widened to 5.3% this June, a fresh reading published this week.
India Ratings sees the connection directly. Karan Gupta, Head and Director, Financial Institutions at the ratings firm, said the RBI’s FCNR(B) announcement is likely to add near-term tailwinds for the banking system’s deposit accretion, which otherwise has been lagging credit growth. A dollar deposit that skips CRR and SLR requirements is, in effect, cheaper and more useful to a bank’s balance sheet than an ordinary rupee term deposit raised at the same moment, which is why lenders chased this money so hard in the first six weeks.
A Rupee Under Pressure Long Before This Window Opened
The backdrop explains the urgency. FCNR(B) inflows had collapsed to under $1 billion in the last financial year from levels many multiples higher the year before, just as the rupee came under renewed strain after the West Asia conflict began. The currency briefly approached 97 to the dollar and closed Monday at 96.45, down 17 paise on the day.
India’s foreign exchange reserves tell the same story from a different angle. They touched an all-time high above $728 billion in late February 2026, then fell for weeks as the RBI sold dollars to slow the rupee’s decline, before climbing back toward $675 billion by mid-July as the central bank resumed purchases alongside the new inflows.
The State of Play, in Numbers
- Rupee closed at 96.45 to the dollar on Monday, having briefly neared 97 after the West Asia conflict began
- Forex reserves stood near $675 billion in mid-July, down from an all-time peak above $728 billion in February
- FCNR(B) inflows had fallen to under $1 billion in the prior financial year before this window opened
- Total NRI deposits across all categories stood at $165.65 billion as of March 2026
The strain reached well beyond currency markets. Prime Minister Narendra Modi publicly asked citizens in May to cut foreign travel, curb fuel use and hold off buying gold for a year, an unusual civilian appeal that underlines how seriously the government treated the external pressure this scheme is meant to relieve.
2013 Offered a Fatter Spread for a Smaller Ask
This is not the RBI’s first time running this playbook. During the 2013 taper tantrum, when the US Federal Reserve signalled it would wind down bond buying, then Governor Raghuram Rajan opened a similar FCNR(B) swap window at a fixed concessional rate of 3.5%. Banks raised roughly $34 billion in the three months the scheme ran, and the RBI has also previously turned to Resurgent India Bonds in 1998 and India Millennium Deposits in 2000 to shore up capital flows during past periods of stress, according to a Bank of America note.
| Feature | 2013 Scheme | 2026 Scheme |
|---|---|---|
| Duration | About 3 months (Sept to Nov) | Nearly 4 months (June 8 to Sept 30) |
| Amount raised so far | Roughly $34 billion (final) | $17.40 billion (42 days in) |
| Swap structure | Fixed concessional rate of 3.5% | At-par swap at the FBIL reference rate |
| US rate backdrop | Near zero | Around 4.5% on Treasury yields |
That last row matters more than it looks. A near zero US rate in 2013 made almost any Indian offer look generous by comparison. With Treasury yields sitting near 4.5% now, the spread NRIs are chasing is thinner, which is part of why this scheme needs a bigger headline number to produce a comparable result.
Banks Are Being Told to Sell Harder Before September
The pressure is not staying inside the RBI. Finance Minister Nirmala Sitharaman met public sector bank chiefs last week and asked them to strengthen engagement with NRIs and roll out innovative foreign currency deposit products, including through GIFT City, to pull in more inflows before the window shuts. Bank executives told her the strongest interest so far has come from NRIs in the United States, the United Kingdom, Singapore, Hong Kong and West Asia, while ECB inflows are expected to pick up in the third quarter of the 2027 financial year.
None of this comes free for the RBI. The central bank, not the banks or the depositors, now carries the currency risk on every dollar raised under the scheme. If the rupee keeps weakening while $50 billion or more sits swapped onto its books, that liability grows with it. HDFC Bank’s own account of the scheme notes the framework became operational on June 8 while higher rates took effect from June 10, a two day gap that shows how quickly the entire banking system pivoted once the concessional terms were confirmed. Whether the last ten weeks of the window close that gap between $17.40 billion and $50 billion will be decided in Mumbai’s back offices, not in RBI press releases.
Frequently Asked Questions
What happens if an NRI withdraws an FCNR(B) deposit before completing one year?
No interest is paid on deposits broken before the one year mark. After that point, premature withdrawal is allowed at the bank’s discretion under its own internal policy, though the bank’s underlying swap with the RBI cannot be cancelled regardless of what the depositor does.
Why can banks access the RBI swap until October 16 when deposits must open by September 30?
The two deadlines serve different purposes. Fresh or renewed FCNR(B) deposits must be mobilised between June 8 and September 30, 2026, but banks are given an extra two week window, until October 16, to actually execute the corresponding swap transactions with the RBI’s Financial Markets Operations Department.
Do the ECB and OFCB windows close on the same date as the FCNR(B) scheme?
No. The FCNR(B) swap window shuts for fresh deposits on September 30, while the concessional facilities covering External Commercial Borrowings and Overseas Foreign Currency Borrowings remain available to eligible borrowers until December 31, 2026, giving corporates and public sector undertakings a longer runway than retail dollar depositors get.
Which foreign currencies qualify, and does that change how the RBI swap works?
Banks may accept FCNR(B) deposits in any freely convertible currency, including the US dollar, pound sterling, euro, yen, Australian dollar and Canadian dollar. The RBI swap itself, however, is conducted only in US dollars, so deposits opened in other currencies are still ultimately hedged back through a dollar leg.
Will FCNR(B) rates stay this high after the window closes on September 30?
Once the concessional swap and the CRR and SLR exemptions expire, banks go back to absorbing their own hedging costs. Rates are widely expected to drift back down toward the 3% to 4% range that prevailed before the scheme, making the current 6% to 7% band a time limited offer rather than a new normal.
Disclaimer: This article is for general information only and is not investment advice. NRIs considering an FCNR(B) deposit should confirm current rates, tenure rules and tax treatment directly with their bank before committing funds.
