- The FCNR(B) deposit scheme swap window closes on August 31, earlier than planned
- Banks must avail RBI swap facility by September 11, moved up from October 16
- FCNR(B) deposits reached $52.3 billion by August 13, expected to hit $65-70 billion
The Reserve Bank of India's special FCNR(B) deposit scheme is entering its final stretch, with the swap window for banks now closing at the end of August, a month earlier than originally planned.
Banks can mobilise FCNR(B) deposits eligible for RBI's swap facility only until August 31, against an earlier deadline of September 30. The window to actually avail of the swap with the RBI has correspondingly moved up to September 11 from October 16.
SBI Research in a report has called the truncation "a prudent decision considering the optimal corpus achievement within the stipulated time." The scheme has moved fast: the first $20 billion took 38 days to mobilise, but the next $20 billion came in just 14 days. In the 13 days to August 13 alone, $16 billion was raised, taking cumulative mobilisation, including overseas foreign currency borrowings and external commercial borrowings, to $56.8 billion.
FCNR(B) explained.
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FCNR(B) deposits alone stood at $52.3 billion as of August 13, up from $36.7 billion on 31 July and $17.4 billion on 17 July. Even with the shortened window, SBI Research expects FCNR(B) mobilisation to reach $65-70 billion, and total inflows including OFCBs and ECBs to touch $80-85 billion, by the time the scheme closes.
The RBI has already used part of the proceeds to rebuild its reserves, recouping $31.2 billion of foreign currency assets as of 7 August, equivalent to 55% of the total amount mobilised.
How FCNR(B) Reshaped India's Banking System
The inflows have left a visible mark on bank balance sheets. Credit growth has continued unabated since Q2 FY26 and stood at 19.3% for the fortnight ended 31 July. Deposit growth, boosted by the $39 billion of FCNR(B) and OFCB inflows recorded by mid-July, touched 15.4% for the fortnight ended July 15, with incremental deposits of Rs 7.1 lakh crore.
Time deposits alone rose by Rs 9.6 lakh crore even as demand deposits contracted over the same period. SBI Research estimates Rs 3.0-3.5 lakh crore of the increase in time deposits is directly attributable to FCNR(B) and OFCB inflows. Between June 15 and July 31, time deposits rose by Rs 8.5 lakh crore in total, and the bank expects a further Rs 2 lakh crore increase between 1 and 15 August, followed by another Rs 3 lakh crore in the second half of the month.
The resulting liquidity and resource build-up is expected to feed through to bond markets. SBI Research estimates the special deposit drive could channel flows of roughly Rs 8-9 lakh crore, or about $85 billion at the upper end, into the banking system. It expects the surge in deposits and foreign currency funding to lower the counterfactual level of government bond yields, though not uniformly across the curve.
The 3-7 year segment is seen as the clearest beneficiary, given maturity matching, carry and lower supply pressure, followed by the 7-10 year segment. The very short end will stay anchored by the RBI's liquidity corridor, the report said, while bonds in the 15-50 year range will continue to carry a sizeable inflation, oil and fiscal-supply premium.
SBI Research drew a contrast with the previous FCNR(B) drive in 2013, when the scheme played out against the backdrop of the global financial crisis, the eurozone's PIIGS crisis and the taper tantrum, forcing the RBI to raise policy rates and tighten liquidity sharply. "2026 playbooks looks different as of now but credible and sustainable macros mechanism are truly warranted," the report said.
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