RBI’s swap window draws $40.8 bn forex inflows under 2 mths, Pg 13

Key Highlights:

• The Reserve Bank of India (RBI) mobilised over $40.8 billion in foreign exchange inflows within two months through its concessional swap window to strengthen domestic liquidity.
• The largest contribution came from Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits, followed by Overseas Foreign Currency Borrowings (OFCBs) and External Commercial Borrowings (ECBs).
• The special facility, announced on June 5, 2026, aims to attract fresh foreign currency inflows, stabilise the rupee and bolster India's foreign exchange reserves.
• The scheme will remain open for FCNR(B) deposits until September 30, 2026, while the facility for OFCBs and ECBs will continue until December 31, 2026.

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Detailed Insights:

• Under the concessional swap facility, banks can mobilise eligible foreign currency deposits and swap them with the RBI at favourable terms, improving domestic foreign exchange liquidity.
• FCNR(B) deposits allow Non-Resident Indians (NRIs) to maintain fixed-term deposits in designated foreign currencies without exposure to exchange rate fluctuations.
• The initiative was introduced amid external uncertainties, including geopolitical tensions and volatile crude oil prices, to strengthen India's external sector resilience.
• Higher foreign currency inflows can enhance foreign exchange reserves, improve market confidence and support exchange rate stability during periods of global financial volatility.
• The strong response reflects continued confidence among overseas Indians and international investors in India's macroeconomic fundamentals and financial system.

Key Concepts Involved:

• Foreign Currency Non-Resident (Bank) [FCNR(B)] Deposit: A fixed-term foreign currency deposit scheme available to NRIs, protected from exchange rate risk.
• Swap Window: A facility through which the RBI exchanges foreign currency with banks under specified terms to augment liquidity.
• External Commercial Borrowing (ECB): Loans raised by eligible Indian entities from recognised foreign lenders.
• Foreign Exchange Reserves: External assets held by the RBI to maintain exchange rate stability and meet international payment obligations.