The Reserve Bank of India has recorded strong traction for its special foreign currency swap facility, pulling in $72.85 billion in foreign currency mobilisation as of August 21, 2026. This mechanism forms a core part of the central bank's strategy to enhance dollar liquidity across the financial system during a period when the rupee and international currency markets face persistent external pressures.
FCNR(B) Deposits Dominate Total Inflows
A commanding share of these funds originated through Foreign Currency Non-Resident (Bank) or FCNR(B) deposits. Commercial banks successfully mobilised $65.397 billion through this single channel, representing nearly 90% of the aggregate amount secured under the special framework. These figures underscore the vital role non-resident deposits play in channelling foreign currency into India.
Breakdown of Financing Routes
Data from the central bank indicates that FCNR(B) deposits served as the primary engine for foreign currency mobilisation. Alongside the dominant FCNR(B) numbers, overseas foreign currency borrowings contributed $4.86 billion, while external commercial borrowings accounted for another $2.591 billion.
FCNR(B) accounts function as term deposits that non-resident Indians maintain with domestic banks in permitted foreign currencies rather than rupees. Because these deposits remain denominated in foreign currency, depositors avoid the exchange rate risks associated with conventional rupee-denominated accounts.
How the Swap Mechanism Operates
For Indian financial institutions, FCNR(B) deposits supply a steady stream of foreign currency funding. Under the RBI's swap arrangement, banks gather eligible foreign currency and exchange it directly with the central bank to secure crucial rupee liquidity.
This arrangement allows banks to obtain necessary rupees while the RBI builds up foreign exchange reserves, reinforcing system-wide liquidity without relying solely on traditional spot market interventions. The facility was originally launched to safeguard financial stability and encourage foreign currency inflows amidst market volatility.
However, the operational timelines differ across the three permitted routes. The special FCNR(B) window is scheduled to close on August 31, 2026, whereas the facilities for external commercial borrowings and overseas foreign currency borrowings remain open until December 31, 2026, leaving banks with a tight window to secure additional deposits.
