RBI forex swap draws $72.8 billion, surpassing 2013 record 2.8x

The Reserve Bank of India's special USD-INR forex swap facility has drawn $72.85 billion in foreign currency inflows as of Aug. 21, nearly three times the $26 billion raised through the 2013 program, prompting an early window closure.

The Finance Ministry called the program India's largest and fastest foreign-currency mobilization effort. "By securing large-scale, long-term non-resident deposits and commercial institutional funding entirely on tap, the Government of India has fortified its external buffers with maximum cost-efficiency," the ministry said in a statement.

FCNR(B) deposits accounted for $65.4 billion, or nearly 90 percent of total inflows. Overseas Foreign Currency Borrowings contributed $4.86 billion and External Commercial Borrowings $2.59 billion. As of July 31, banks had mobilized $40.8 billion through the facility, meaning FCNR(B) deposits alone rose by more than $28.6 billion in three weeks.

The RBI launched the facility on June 8 to attract dollar inflows as the rupee faced pressure from foreign portfolio outflows and a high oil import bill. The FCNR(B) window closes Aug. 31, while ECB and OFCB mobilization continues until Dec. 31. The record inflows strengthen India's external buffers and provide direct support to the rupee.

The latest numbers mark a sharp acceleration in mobilization. As of July 31, banks had mobilized $40.816 billion through the facility, including $36.725 billion through FCNR(B) deposits. The FCNR(B) mobilization has therefore risen by more than $28.6 billion in just three weeks, showing the depth of non-resident Indian appetite for the concessional swap terms.

The RBI had initially provided a longer window for FCNR(B) mobilization but subsequently brought the deadline forward to Aug. 31, citing the "encouraging response" to the facility and the resultant foreign exchange inflows. The central bank's decision to close the window early — rather than extend it — indicates that policymakers view the mobilization as sufficient to meet their external buffer objectives.

Banks Race to Meet Aggressive Targets

The strong mobilization has been supported by aggressive targets set by several large public sector banks. State Bank of India, the country's largest lender, said on Aug. 8 that it had already mobilized around $6 billion through FCNR(B) deposits and was targeting $10 billion. Bank of Baroda is targeting $4-5 billion through a combination of FCNR(B) deposits, medium-term notes and overseas foreign currency borrowings. Punjab National Bank is targeting $2.5 billion through FCNR(B) deposits, while Canara Bank has guided for $2.3-2.5 billion through FCNR(B) deposits and overseas borrowings. Indian Bank has set a target of $2 billion through FCNR(B) deposits.

The current FCNR(B) window has already taken the mobilization well beyond the scale of the RBI's special swap scheme introduced in 2013. During that exercise, banks raised around $26 billion through FCNR(B) deposits, while total foreign currency inflows, including overseas borrowings, were around $34 billion. The current program has raised nearly 2.8 times that amount in a shorter timeframe, reflecting both stronger diaspora engagement and more aggressive bank-level targets.

The dominance of FCNR(B) deposits within the facility carries specific implications for India's external position. Unlike short-term portfolio flows, FCNR(B) deposits are medium-term instruments with fixed maturities, providing a more stable source of foreign currency funding. The Finance Ministry described the response as evidence of continued confidence in the Indian economy despite challenges in global financial markets.

With the FCNR(B) window closing Aug. 31, banks have only a limited period remaining to bring in fresh deposits under the concessional arrangement. Indian banks have stepped up efforts to attract additional FCNR(B) deposits by offering higher interest rates following the RBI's decision to shorten the swap window. The ECB and OFCB channels remain open until Dec. 31, 2026, providing a continued avenue for institutional foreign currency borrowing.

The inflows add to India's foreign exchange reserves, which had come under pressure as the rupee depreciated against the dollar. The scale of mobilization — achieved in less than 11 weeks — provides a meaningful cushion for the currency and reduces the risk of disorderly depreciation should global financial conditions tighten further.

This article is for informational purposes only and does not constitute investment advice.