Key Takeaways
- India’s banking system attracted $136.38 billion in foreign currency inflows through the RBI forex swap facility by August 31.
- FCNR(B) deposits contributed $127.23 billion to the total foreign inflows.
- Banking liquidity reached ₹6.65 lakh crore by August 31.
India’s banking system attracted $136.38 billion in foreign currency inflows through the RBI forex swap facility by August 31.
FCNR(B) deposits accounted for most of the mobilisation, bringing in $127.23 billion. Overseas foreign currency borrowings contributed $5.26 billion, while external commercial borrowings added $3.89 billion, with the figures remaining provisional.
RBI forex swap facility drives foreign currency inflows
The RBI forex swap facility was introduced on June 8 to attract foreign currency inflows and strengthen India’s external buffers. By August 21, banks had mobilised $65.4 billion through FCNR(B) deposits, while combined inflows through all three routes stood at about $73 billion.
The response led the RBI to advance the closure of the FCNR(B) deposit mobilisation window to August 31 from September 30. The RBI forex swap facility for eligible FCNR(B) deposits already mobilised remains available until September 11.
The schemes covering external commercial borrowings and overseas foreign currency borrowings will remain open until December 31, 2026.
The strong mobilisation was also reflected in the tenure of FCNR(B) deposits. Banks increased their use of longer-tenure foreign currency deposits while the RBI facility reduced the cost and risk linked to managing foreign currency exposure.
For Indian businesses, the inflows have added to the liquidity available within the banking system. Banking liquidity reached ₹6.65 lakh crore on August 31, the highest level since May 2022.
The weighted average call rate stood at 4.98%, below the prevailing repo rate. The increase in system liquidity followed the substantial foreign currency mobilisation through the RBI facility.
Higher liquidity changes banking funding conditions
The latest mobilisation has exceeded the response to the RBI’s 2013 FCNR(B) swap scheme. Banks had raised about $26 billion through FCNR(B) deposits under that earlier facility.
The current programme has generated more than five times that amount through FCNR(B) deposits alone. The total across FCNR(B) deposits, overseas foreign currency borrowings, and external commercial borrowings reached $136.38 billion by August 31.
The inflows also create a large pool of funds that banks need to deploy across their businesses. The scale of mobilisation means banks have received substantial foreign currency resources within a relatively short period.
The increased liquidity has also affected borrowing conditions in the banking system. With more funds available, banks have reported a significant rise in system liquidity, while the call rate has remained below the repo rate.
For business owners and entrepreneurs, these developments are relevant to the broader funding environment. The banking system now holds significantly higher liquidity than earlier in the year, while foreign currency inflows have strengthened available external buffers.
The RBI has stated that the latest figures are provisional. Final reporting, accounting, and reconciliation could change the reported totals.
As of August 31, FCNR(B) deposits remained the dominant channel, accounting for $127.23 billion of the $136.38 billion total. Overseas foreign currency borrowings and external commercial borrowings contributed the remaining $9.15 billion.
The swap facility for eligible FCNR(B) deposits already mobilised remains available until September 11. The ECB and OFCB routes remain open until December 31, 2026, keeping the foreign currency mobilisation framework active across multiple channels.
