The Reserve Bank of India (RBI) has relaxed the weekly access restriction on its concessional dollar-rupee swap facility for large Foreign Currency Non-Resident (Bank), or FCNR(B), deposit transactions. Banks can now approach the central bank outside their designated weekly window for FCNR(B) swap transactions exceeding $100 million, giving lenders greater flexibility to transfer large dollar inflows to the RBI without waiting several days.
The move comes just days before the August 31 deadline for mobilizing FCNR(B) deposits under the special scheme, which has attracted more than $65 billion through FCNR(B) deposits alone. The previous system allowed each bank to access the swap facility only once a week on an assigned day, creating a lag between raising foreign currency from depositors and transferring those dollars to the RBI. The latest relaxation is aimed at easing the resulting liquidity and hedging pressures in the foreign-exchange market.
RBI Changes FCNR(B) Swap Access For Large Transactions
Under the original arrangement, banks were assigned a specific day each week to use the RBI’s concessional dollar-rupee swap facility. A bank could conduct its eligible swaps only once during that week.
The RBI has now created an exception for transactions above $100 million.
Banks can access the swap window outside their allotted weekly day when the FCNR(B) transaction exceeds the threshold. Transactions below $100 million will continue to remain subject to the designated weekly access arrangement, according to market sources.
Revised FCNR(B) Swap Framework
| Parameter | Earlier Arrangement | Revised Arrangement |
|---|---|---|
| Regular access | Once a week | Once a week |
| Designated bank day | Required | Still applies for regular transactions |
| Transactions above $100 million | Weekly window | Can be accessed outside weekly window |
| Transactions below $100 million | Weekly window | Weekly window continues |
| Objective | Manage swap operations | Improve flexibility for large inflows |
| Beneficiaries | All participating banks | Banks receiving large FCNR(B) inflows |
The relaxation is particularly relevant as banks have been mobilizing very large amounts of foreign currency in the final days of the special deposit scheme.
Why The RBI Made The Change
The weekly restriction created a timing mismatch.
A bank could raise dollars from an NRI depositor on one day but potentially have to wait several days before its designated RBI swap day arrived. During that period, the bank had to manage the excess dollar balance itself.
That became increasingly significant as FCNR(B) inflows accelerated.
NRI Deposits Mobilized
↓
Bank Receives Dollars
↓
Weekly RBI Swap Day
↓
Dollar-Rupee Swap With RBI
The latest relaxation shortens that gap for large transactions:
Large Inflow Above $100 Million
↓
Bank Approaches RBI Outside Regular Slot
↓
Dollar-Rupee Swap
↓
Reduced Temporary Dollar Holdings
This can make it easier for banks to manage their foreign-currency positions and reduce the need to roll over excess dollars in the short-term market.
FCNR(B) Deposits Have Driven The $73 Billion Inflow
The RBI’s special swap facility has attracted an unusually large volume of foreign currency since it was launched in June.
As of August 21, total inflows through FCNR(B) deposits, overseas foreign currency borrowings (OFCBs) and external commercial borrowings (ECBs) stood at $72.85 billion.
FCNR(B) deposits accounted for $65.40 billion, or nearly 90% of the total.
RBI Special Swap Facility Inflows
| Source | Inflows As Of Aug. 21 |
|---|---|
| FCNR(B) deposits | $65.40 billion |
| OFCBs | $4.86 billion |
| ECBs | $2.59 billion |
| Total | $72.85 billion |
The scale of FCNR(B) mobilization is considerably larger than the other two channels, making the latest change particularly relevant to banks participating aggressively in the deposit scheme.
RBI’s Original FCNR(B) Swap Scheme
The RBI announced the special dollar-rupee swap facility on June 5 and operationalized it on June 8.
Under the arrangement, eligible banks can mobilize fresh FCNR(B) deposits with original maturities of three to five years and swap the foreign currency with the RBI for rupees.
The RBI provides the foreign currency back to the bank at maturity at a concessional cost.
The structure effectively gives banks a way to access rupee liquidity while transferring the foreign currency raised through eligible deposits to the central bank.
How The Swap Works
NRI Places FCNR(B) Deposit
↓
Indian Bank Receives Foreign Currency
↓
Bank Swaps Currency With RBI
↓
Bank Receives Rupees
↓
RBI Holds Foreign Currency
↓
Swap Reversed At Maturity
The arrangement was designed to encourage banks to attract longer-term foreign currency deposits from overseas Indians while helping strengthen India’s external buffers.
Why FCNR(B) Deposits Are Attractive To NRIs
FCNR(B) deposits are foreign-currency term deposits maintained by non-resident Indians with Indian banks.
Because the deposits are denominated in foreign currency, depositors do not take the same rupee-denomination exchange-rate exposure associated with ordinary rupee deposits.
The RBI’s special swap facility also makes it easier for banks to absorb the foreign currency while providing rupee funding domestically.
This has created an incentive structure involving three participants:
| Participant | Potential Benefit |
|---|---|
| NRI depositors | Foreign-currency deposit exposure |
| Indian banks | Access to concessional swap facility and rupee liquidity |
| RBI | Large foreign-currency inflows and stronger external buffers |
The overwhelming response demonstrates the attractiveness of the arrangement, although the RBI’s eventual cost of the swaps will depend on factors such as exchange rates, forward premia and the maturity profile of the transactions.
Large Dollar Inflows Created Market Pressure
The speed of the inflows has also created challenges for banks and the foreign-exchange market.
Under the weekly access system, dollars raised by a bank could remain on its balance sheet until its designated swap day.
Banks then had to manage those balances in the short-term market.
Reuters reported that the one-day dollar/rupee swap cost surged to 2.5 paise on Thursday, compared with roughly 0.40-0.50 paise in recent sessions. The one-month annualized implied hedging cost also briefly rose by more than 30 basis points.
Impact Of The Weekly Restriction
| Development | Consequence |
|---|---|
| Large FCNR(B) inflows | Banks receive more dollars |
| Fixed weekly swap day | Dollars may remain temporarily with banks |
| Excess dollar balances | Increased short-term funding/hedging pressure |
| Higher overnight swap demand | Higher swap costs |
| Higher hedging costs | Greater pressure on bank treasury operations |
| Relaxed access above $100 million | Faster transfer to RBI |
The new rule is therefore not simply an administrative change. It is intended to address a market bottleneck created by the unusually rapid accumulation of foreign currency.
RBI Is Trying To Prevent A Liquidity Build-Up
The FCNR(B) scheme has also contributed to a substantial increase in domestic banking-system liquidity.
When banks swap foreign currency with the RBI and receive rupees, the transaction increases rupee liquidity in the banking system unless the central bank subsequently absorbs it through other operations.
Reuters reported that banking-system liquidity surplus averaged more than ₹3.4 trillion in August and could rise above ₹5 trillion in September when additional FCNR-related inflows and government bond redemptions are taken into account.
Liquidity Chain
FCNR(B) Inflows
↓
Banks Swap Dollars With RBI
↓
Banks Receive Rupees
↓
Banking-System Liquidity Increases
↓
RBI Uses Liquidity-Management Tools
↓
VRRR / Other Absorption Operations
The RBI has already been using variable rate reverse repo (VRRR) auctions to absorb excess liquidity.
FCNR(B) Window Closes On August 31
The latest relaxation arrives just before the end of the deposit-mobilization period.
The RBI originally planned to keep the FCNR(B) mobilization window open until September 30. However, following the much stronger-than-expected response, it advanced the deadline to August 31.
Eligible FCNR(B) swaps can still be availed with the RBI until September 11.
Key Dates
| Event | Date |
|---|---|
| Special swap facility announced | June 5, 2026 |
| Facility operationalized | June 8, 2026 |
| Original FCNR(B) mobilization deadline | September 30, 2026 |
| Revised FCNR(B) mobilization deadline | August 31, 2026 |
| Final date to avail eligible FCNR(B) swaps | September 11, 2026 |
| ECB/OFCB scheme remains open until | December 31, 2026 |
The accelerated closure indicates that the RBI considers its foreign-currency mobilization objective to have been achieved well ahead of schedule.
Banks Have Rushed To Mobilize FCNR(B) Deposits
The response has been particularly strong among India’s largest banks.
Earlier RBI data showed that SBI had mobilized $4.13 billion, ICICI Bank $3.70 billion, Axis Bank $1.60 billion and HDFC Bank $1.40 billion between June 5 and July 30.
Selected Bank Mobilization
| Bank | FCNR(B) Mobilization Through July 30 |
|---|---|
| State Bank of India | $4.13 billion |
| ICICI Bank | $3.70 billion |
| Axis Bank | $1.60 billion |
| HDFC Bank | $1.40 billion |
The figures subsequently increased substantially across the banking system as the scheme continued to attract deposits through August.
What The Relaxation Means For Banks
For banks, the biggest advantage is greater treasury flexibility.
A bank receiving a large FCNR(B) inflow can now transfer the foreign currency to the RBI more quickly rather than waiting for its designated swap day.
This should help banks:
- Reduce temporary dollar balances
- Lower overnight rollover requirements
- Manage currency exposure more efficiently
- Reduce pressure on short-term swap markets
- Improve treasury planning before the August 31 deadline
The impact should be greatest for banks receiving individual inflows above $100 million.
Smaller transactions will continue to follow the weekly access arrangement, limiting the scope of the relaxation.
What It Means For India’s Foreign-Exchange Position
The FCNR(B) program was designed partly to strengthen India’s external buffers.
The inflows do not necessarily translate into an equivalent immediate strengthening of the rupee because the dollars are transferred to the RBI through the swap mechanism rather than simply being sold into the spot market.
Instead, the RBI gains access to foreign currency while banks receive rupees.
This provides the central bank with additional foreign-exchange resources that can be useful during periods of external-market volatility.
The government said the scheme had mobilized $73 billion by August 21, surpassing the approximately $26 billion raised under India’s 2013 FCNR(B) swap scheme.
The Bigger Picture
The RBI’s decision to relax the weekly access rule for FCNR(B) swaps above $100 million is a targeted response to the extraordinary speed of foreign-currency inflows generated by its special deposit scheme. With FCNR(B) deposits alone reaching $65.40 billion by August 21, the original once-a-week arrangement became increasingly difficult for banks to manage efficiently.
By allowing large transactions to be swapped outside the designated weekly window, the RBI can reduce the time dollars remain temporarily on bank balance sheets and ease pressure in short-term currency markets. The move also comes as the central bank manages the significant rupee liquidity created by the broader swap program.
Looking Ahead
The immediate focus will be on the final days of FCNR(B) deposit mobilization before the August 31 deadline and the subsequent September 11 deadline for completing eligible swaps with the RBI. Banks are likely to make extensive use of the additional flexibility as they process the final wave of large deposits.
Beyond the immediate scheme, the RBI will have to manage the liquidity consequences of the enormous inflows. With banking-system surplus liquidity already elevated, the central bank may need to continue using VRRR auctions and potentially longer-duration liquidity-absorption tools. The latest swap-rule change therefore represents not only a measure to help banks manage dollars but also another step in the RBI’s broader effort to manage the monetary and foreign-exchange effects of the FCNR(B) inflow surge
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