Forex inflows received by India under the RBI’s swap facility, Pg10

Key Highlights:

• India received $20.72 billion in foreign exchange inflows under the Reserve Bank of India (RBI)'s swap facility as of July 17, 2026.
• The facility was introduced to encourage overseas fundraising by state-owned firms and attract Foreign Currency Non-Resident (Bank) Deposits (FCNR(B)).
• The largest portion of these inflows, $17.406 billion, came through FCNR(B) deposits.
• The remaining inflows were from Overseas Foreign Currency Borrowings (OFCBs) totaling $1.97 billion and External Commercial Borrowings (ECBs) amounting to $1.342 billion.

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Detailed Insights:

• The RBI announced these special measures on June 5, 2026, and made them operational on June 8, 2026.
• The primary objectives of the facility are to strengthen India's Balance of Payments (BoP), boost capital inflows, and stabilize the Indian Rupee and foreign exchange reserves.
• Under this scheme, the RBI absorbs the hedging cost for the swaps, making it more attractive for banks to mobilize foreign currency funds.
• The window for fresh FCNR(B) deposits under the concessional swap facility is open until September 30, 2026.
• The concessional swap facility for ECBs and OFCBs will continue until December 31, 2026.
• This initiative is reminiscent of similar measures undertaken by the RBI in 2013 to attract foreign currency during periods of economic pressure.

Key Concepts Involved:

• RBI's Swap Facility: A mechanism where the Reserve Bank of India offers concessional foreign exchange swaps to banks to encourage specific types of foreign currency inflows.
• Foreign Currency Non-Resident (Bank) Deposits (FCNR(B)): Fixed-term deposits held by Non-Resident Indians (NRIs) in foreign currencies with Indian banks, protecting against rupee depreciation.
• External Commercial Borrowings (ECBs): Loans raised by eligible resident entities from recognized non-resident entities, often used for capital expenditure.
• Overseas Foreign Currency Borrowings (OFCBs): Borrowings by Authorized Dealer Category-I banks in foreign currency from overseas markets.
• Balance of Payments (BoP): A statement summarizing all economic transactions between residents of a country and the rest of the world over a specific period.