The Reserve Bank of India has decided to end early one of its most successful currency interventions in over a decade. It has simply worked faster than anyone expected.
The RBI announced on Friday, 14 August 2026, that its concessional swap facility for Foreign Currency Non-Resident (FCNR(B)) deposits will now be available only for deposits mobilised up to 31 August 2026, a full month earlier than the original 30 September deadline. Banks will still be permitted to avail of swaps with the RBI on deposits raised before that cutoff until 11 September 2026.
“Based on the encouraging response to the Swap Facility for FCNR(B) deposits and the resultant forex inflows, it has been decided that the Swap facility for FCNR(B) deposits will be available only for deposits mobilised till August 31, 2026,” the central bank said in its statement.
The numbers behind the early closure
As of 13 August 2026, total forex inflows under the facility stood at $56.85 billion. Of that, FCNR(B) deposits alone accounted for $52.3 billion, with Overseas Foreign Currency Borrowings contributing $2.81 billion and External Commercial Borrowings a further $1.74 billion.
That figure represents a rapid acceleration even within recent weeks. Total inflows had stood at $40.816 billion as of 31 July, and just $20.72 billion as of 17 July. In the space of roughly two weeks, inflows very nearly doubled again, moving from $40.8 billion to $56.85 billion.
What is the FCNR(B) swap facility?
What is the FCNR(B) concessional swap facility?
The FCNR(B) swap facility, announced by the RBI on 5 June 2026 and operationalised on 8 June, allowed Indian banks to mobilise fresh Foreign Currency Non-Resident deposits with a tenor of three to five years, and then swap the resulting dollar inflows with the RBI at the prevailing spot rate on concessional terms.This gave banks a cheaper cost of funds than raising the same dollars commercially, allowing them to offer NRI depositors significantly higher interest rates than would otherwise be commercially viable. It is the same mechanism the RBI used in 2013 during the taper tantrum currency crisis, when a comparable scheme raised around $34 billion over three months. This year’s facility has already raised more than 50% above that entire 2013 total, in a comparable time frame.
Why the RBI moved so quickly to close it
Governor Sanjay Malhotra had, only nine days before this announcement, explicitly ruled out an early closure. Speaking at the RBI’s post-Monetary Policy Committee press conference on 5 August, Malhotra said the central bank was not considering any proposal to prematurely close the window, and that the liquidity generated by the strong inflows would be temporary and would be absorbed by the economy’s normal funding requirements.
The scale of inflow in the days since that press conference appears to have changed the calculation. Government data cited around 5 August showed net FCNR(B) inflows of $28 billion as of 30 July, split across private-sector banks at $10.73 billion, public-sector banks at $8.84 billion, and foreign banks at $8.37 billion. Within roughly two weeks, that $28 billion figure had grown to over $52 billion in FCNR(B) inflows alone, nearly double the amount recorded just a fortnight earlier.
That pace of inflow has direct consequences for India’s currency and liquidity position. India’s foreign exchange reserves rose sharply by $14.136 billion in the week ended 7 August, crossing the $707 billion mark for the first time, driven primarily by a jump in foreign currency assets. A surge of dollar inflows at this scale and speed can itself complicate the RBI’s broader liquidity management, which appears to be the practical reason for closing the concessional window a month early rather than allowing inflows to run unchecked until the original September deadline.
What does not change
The early closure applies specifically to the FCNR(B) deposit swap facility. The RBI was explicit that the separate scheme covering External Commercial Borrowings and Overseas Foreign Currency Borrowings will continue to remain open until 31 December 2026, entirely unaffected by this announcement.
What analysts now expect
Even before this week’s acceleration, SBI Research had projected FCNR(B) deposits could reach $65 to 70 billion by the scheme’s end, with total inflows across all three instruments potentially reaching $80 to 85 billion. With inflows already at $56.85 billion combined, and FCNR(B) alone at $52.3 billion, roughly two and a half weeks before the newly announced closure date, the scheme now appears likely to land close to, or potentially exceed, even those upgraded forecasts by the time the 31 August cutoff arrives.
What this means for NRIs who have not yet deposited
The practical message for NRIs in Australia, the UK, the UAE, the US, Canada and New Zealand who have been considering an FCNR(B) deposit under this scheme is straightforward and urgent: the window to open a new deposit under the concessional rates now closes on 31 August 2026, not 30 September as originally announced. That gives prospective depositors roughly two and a half weeks from this announcement to act.
Deposits already booked before the new 31 August cutoff retain their agreed terms and rates for the full tenor, subject to the standard one-year lock-in condition that has applied throughout the scheme. Anyone who deposits after 31 August will not be eligible for the concessional swap-backed rates, and should expect standard FCNR(B) terms to apply instead, likely reverting toward the 3 to 4% range that prevailed before the scheme began.
What NRIs need to know before the new deadline
Has the FCNR(B) interest rate itself changed, or only the deposit deadline?
This announcement changes only the deadline for mobilising new deposits under the concessional swap facility, from 30 September to 31 August 2026. It does not itself change the interest rates banks are currently offering, though individual banks may adjust their published rates independently as the scheme approaches its new closure date.
If I deposit before 31 August, does my deposit still need to be held for the full three-to-five year tenor?
Yes. The three-to-five year tenor requirement for FCNR(B) deposits under this scheme is unchanged. Only the deadline for opening the deposit has moved earlier.
Does this affect deposits I have already made under the scheme?
No. Deposits already booked before 31 August 2026 retain their agreed terms, rates and the one-year lock-in condition that has applied throughout the scheme, regardless of the facility’s closure date.
Why did the RBI close this early when it explicitly ruled that out just over a week earlier?
Governor Malhotra’s 5 August comments reflected the RBI’s position at that time, based on the inflow data then available. The subsequent acceleration, inflows nearly doubling in the following fortnight, appears to have prompted the central bank to revise that position given the pace at which dollar liquidity was entering the system.
Is the External Commercial Borrowings and Overseas Foreign Currency Borrowings scheme also closing early?
No. The RBI explicitly confirmed that the scheme remains open until 31 December 2026 as originally announced. Only the FCNR(B) deposit swap facility’s deadline has moved.
Comments 1