The foreign currency non-resident (bank) or FCNR(B) scheme closed in August after achieving a bumper accretion of $127.23 billion, with flows almost doubling in the last 10 days of the scheme. According to the latest RBI data, this brought total inflows from such special schemes to $136.38 billion. The scheme was launched on June 8, 2026 to boost dollar inflows and strengthen foreign exchange reserves, allowing banks to swap eligible overseas borrowings with the central bank at concessional rates. The Reserve Bank of India advanced the timeline for banks to accept incentives-laden FCNR(B) deposits by a month to August 31, 2026, noting the strong inflows through the scheme. The facility was announced as part of the RBI's efforts to strengthen India's external sector position and support foreign exchange liquidity amid global market uncertainties.
GIFT IFSC banking units have emerged as a significant player in India's foreign-currency mobilisation, with $52.82 billion of the total $127.23 billion FCNR(B) deposits being disbursed through their channels. As per IFSCA data, 20 IFSC Banking Units had sanctioned $54.02 billion under the RBI's special swap facility for FCNR(B) deposits, with $52.82 billion disbursed as of August 31, 2026. Uday Kotak, founder of Kotak Mahindra Bank, highlighted that this performance signifies GIFT's emergence as a growing International Financial Centre. The IBUs also disbursed $11.62 billion through External Commercial Borrowings (ECBs) between April and August 2026, with monthly ECB disbursements increasing from $1.54 billion in April to $3.54 billion in August. During the same period, Indian banks raised $11.12 billion through bond listings on IFSC exchanges, including $9.17 billion during July and August.
Financial experts are raising concerns about the true nature of the $127 billion FCNR inflows, with Sidharth Sogani Jain from Blue Aster Capital emphasizing that "127 billion dollars is actually borrowed money, not earned money. India is not exporting anything to 'earn' this. On maturity, both principal and interest are repayable in dollars." Jain warned that the repayment would require India to source dollars in the future, questioning who would ultimately bear the associated cost. He noted that the RBI is bearing the entire hedging burden, which is roughly 3.5%, effectively shifting currency risk to the central bank's balance sheet. Jain argued that India could have focused on measures to generate dollars through exports rather than relying on borrowing, stating that "India could have boosted exports through subsidies, tax relief, etc. Instead of borrowing, we could have earned these dollars."
The RBI's special USD-INR forex swap facility for FCNR(B) deposits, Overseas Foreign Currency Borrowings (OFCB) and External Commercial Borrowings (ECBs) generated $136.38 billion in total inflows as on August 31, 2026. According to the RBI data, FCNR(B) deposits alone accounted for $127.23 billion, while OFCBs contributed $5.26 billion and ECBs amounted to $3.89 billion. The RBI noted that the latest figures are provisional and subject to final reporting, accounting and reconciliation. The facility for ECBs and OFCBs will remain open until December 31, 2026, as hitherto, providing continued opportunities for foreign currency mobilisation.
According to The Economic Times, FCNR(B) deposits accounted for over 93% of the total dollar inflows, with banks adding the most dollars to the kitty in the last ten days. The scheme's closure has led to a noteworthy increase in dollar inflows, which has positively impacted foreign exchange reserves. However, the Reserve Bank of India must now tackle the critical issue of managing surplus liquidity efficiently. Nomura noted that managing liquidity while keeping monetary policy signals intact will be a challenge going into the October meeting, where their base case is a policy hold. The developments are helping build a deeper and more integrated international banking ecosystem by connecting global pools of capital with India's financing requirements. Samir Arora from Helios Capital Management suggested that setting aside funds according to the maturity schedule would allow the RBI and government to present reserves after accounting for the FCNR redemption requirement, while the money would continue to remain with them.
