RBI Scheme Helps Banks Raise $17.4 Billion from Overseas in Six Weeks

Indian banks have mobilised $17.40 billion from overseas under a special window introduced by the Reserve Bank of India (RBI) to attract Foreign Currency Non-Resident (Bank) — FCNR(B) — deposits. The scheme, operationalised on June 8, 2026, allows lenders to raise fresh three- to five-year deposits until September 2026, with the central bank covering the hedging cost through a concessional swap facility.

The RBI announced the figures on July 17, 42 days after the scheme was launched. The central bank stated that the swap facility has attracted steady forex inflows. Industry expectations initially suggested that banks could raise over $50 billion by the time the window closes at the end of September.

The scheme is designed to strengthen India's balance of payments and encourage capital inflows. It comes amid pressure on the rupee, which has depreciated following the West Asia conflict. The rupee closed at 96.45 against the US dollar on Monday, down 17 paise from the previous close. Foreign investors had withdrawn funds as crude oil prices spiked, prompting the RBI to use its foreign exchange reserves to prevent a sharper decline.

Under the special dispensation, banks can swap the FCNR(B) deposits with the RBI at a concessional rate, effectively eliminating the hedging cost. This makes the deposits more attractive for lenders, who are offering interest rates of around 7% after accounting for the hedging benefits. Experts believe the measures could attract an additional $50 billion to $70 billion in foreign capital.

Punjab National Bank Managing Director and CEO Ashok Chandra expressed optimism about achieving the overall target. He said most inflows are expected during the latter half of August and September.

In addition to the FCNR(B) scheme, the RBI has eased norms for state-owned enterprises to borrow overseas. Under the overseas foreign currency borrowing (OFCB) scheme, banks raised $1.97 billion, and under external commercial borrowings (ECBs), $1.34 billion has been mobilised so far. The total amount raised under all three schemes now stands at $20.71 billion.

As of March 2026, total Non-Resident Indian (NRI) deposits stood at $165.65 billion, of which FCNR(B) deposits accounted for $33.75 billion.

FCNR(B) deposits are fixed-term accounts that NRIs, Overseas Citizens of India (OCIs), and Persons of Indian Origin (PIOs) can maintain in designated foreign currencies such as the US dollar, pound sterling, euro, Japanese yen, Australian dollar, and Canadian dollar. Interest earned on these deposits is exempt from Indian income tax if the depositor qualifies as a non-resident under Indian tax laws. Banks can offer interest rates linked to internationally accepted benchmark rates.

The current scheme echoes a similar initiative launched during the 2013 'taper tantrum', when the US Federal Reserve signalled a withdrawal of accommodative monetary policy, leading to capital outflows from India. At that time, the RBI introduced a forex swap window allowing banks to mobilise FCNR(B) deposits with a minimum three-year maturity. Banks raised about $34 billion during the three-month window.