Banks mobilise $17.40 billion under special FCNR(B) scheme

📌 Summary:

• Indian banks have raised $17.40 billion from overseas under the RBI's special window allowing fresh three- to five-year Foreign Currency Non-Resident (Bank) — FCNR(B) — deposits until September 2026

• The mobilisation came 42 days after the RBI operationalised the scheme on June 8, 2026; figures are as of July 17. Banks were originally expected to raise over $50 billion

• Stated objectives: boosting capital inflows, shoring up the rupee, strengthening foreign exchange reserves and the balance of payments

• Trigger context: after the West Asia conflict began, the rupee depreciated close to 97/dollar, foreign investors pulled out funds amid the crude oil price spike, and the RBI drew on the forex kitty to defend the rupee. On Monday the rupee closed 17 paise down at 96.45

• Mechanism: the RBI permits banks to swap these deposits with it at a concessional rate, effectively absorbing the entire hedging cost — making FCNR(B) a cheaper overseas funding source. With hedging sops, banks are offering around 7% interest

• Experts estimate the package could attract an additional $50-70 billion of foreign capital

• Companion measures: under the overseas foreign currency borrowing (OFCB) scheme banks mobilised $1.97 billion, and under external commercial borrowings (ECBs) $1.34 billion — total across the three schemes is $20.71 billion

• PNB MD and CEO Ashok Chandra expects most inflows in the latter half of August and September and is optimistic the $50 billion target is achievable

• Stock position: total NRI deposits stood at $165.65 billion as of March 2026, of which FCNR(B) deposits were $33.75 billion

• Historical precedent: during the 2013 taper tantrum, facing capital outflows and rupee pressure, the RBI introduced a similar special forex swap window for FCNR(B) deposits

🎯 UPSC Relevance: GS3 — external sector management, balance of payments, exchange rate policy, and the RBI's toolkit for defending the rupee during geopolitical and commodity-price shocks.

📝 Prelims Facts:

• FCNR(B) deposits are fixed-term deposits in India held by NRIs, OCIs and PIOs in designated foreign currencies (US dollar, pound sterling, euro, Japanese yen, Australian dollar, Canadian dollar) — not converted into rupees
• Interest on FCNR(B) is exempt from income tax in India so long as the depositor qualifies as a non-resident
• Scheme operationalised June 8, 2026; open until September 2026; tenor three to five years
• Total NRI deposits $165.65 billion (March 2026); FCNR(B) share $33.75 billion
• The 2013 "taper tantrum" refers to market turmoil following the US Federal Reserve's signalled withdrawal of accommodative monetary policy

🔑 Key Term: Forex swap window — a facility in which the central bank takes the foreign currency raised by banks and provides rupees, agreeing to reverse the exchange at a pre-agreed rate on a future date, thereby absorbing the exchange-rate (hedging) risk on behalf of the bank.