The Reserve Bank of India has moved the FCNR(B) deposit deadline to August 31, 2026, advancing it by a month from the originally announced September 30, citing higher-than-expected foreign currency inflows. The central bank's decision follows a strong response to the facility, which was designed to bring foreign currency into India's banking system at a time when dollar liquidity was a concern. According to the latest RBI data, forex inflows under the facility stood at $56.84 billion as on August 13, up from $40.81 billion reported as of July 31, with FCNR(B) deposits accounting for $52.30 billion, followed by OFCBs at $2.80 billion and ECBs at $1.74 billion. The swap facility will now be available only for FCNR(B) deposits mobilised till August 31, 2026, with banks able to avail of swaps under this facility with the central bank till September 11, 2026. The scheme for external commercial borrowings (ECBs) and overseas foreign currency borrowings (OFCBs) will continue to remain open till December 31, 2026, as previously announced. The latest data show that FCNR(B) deposits have been the dominant source of foreign exchange inflows under the special facility, accounting for more than 90% of the total $56.84 billion mobilised through the three channels. This decision contrasts with RBI governor Sanjay Malhotra's comments after the monetary policy review on April 5, when he said there was no proposal under consideration to close the scheme prematurely. SBI Research expects FCNR(B) mobilisation to reach $65-70 billion, and total inflows including OFCBs and ECBs to touch $80-85 billion by the time the scheme closes, despite the shortened window.
The scheme has demonstrated remarkable acceleration in its final phase, with the first $20 billion taking 38 days to mobilise, but the next $20 billion coming in just 14 days. In the 13 days to August 13 alone, $16 billion was raised, taking cumulative mobilisation to the current $56.84 billion mark. FCNR(B) deposits alone stood at $52.3 billion as of August 13, up from $36.7 billion on July 31 and $17.4 billion on July 17. The RBI has already used part of the proceeds to rebuild its reserves, recouping $31.2 billion of foreign currency assets as of August 7, equivalent to 55% of the total amount mobilised. SBI Research in a report has called the truncation "a prudent decision considering the optimal corpus achievement within the stipulated time", noting that the scheme has moved fast beyond initial expectations.
The inflows have left a visible mark on bank balance sheets, with credit growth continuing unabated at 19.3% for the fortnight ended July 31. Deposit growth, boosted by the $39 billion of FCNR(B) and OFCB inflows recorded by mid-July, touched 15.4% for the fortnight ended July 15, with incremental deposits of ₹7.1 lakh crore. Time deposits alone rose by ₹9.6 lakh crore even as demand deposits contracted over the same period. SBI Research estimates ₹3.0-3.5 lakh crore of the increase in time deposits is directly attributable to FCNR(B) and OFCB inflows. Between June 15 and July 31, time deposits rose by ₹8.5 lakh crore in total, with the bank expecting a further ₹2 lakh crore increase between July 15 and August 15, followed by another ₹3 lakh crore in the second half of the month. The resulting liquidity and resource build-up is expected to feed through to bond markets, with SBI Research estimating the special deposit drive could channel flows of roughly ₹8-9 lakh crore into the banking system.
The weekly access restriction creates a lag between dollar mobilisation and transfer to the central bank, potentially affecting banks' liquidity management and foreign exchange operations. According to the banking sources, this systematic approach ensures that swap volumes remain proportional to actual dollar deposit accumulation, maintaining the integrity of the concessional swap mechanism. Gaura Sengupta, chief economist at IDFC First Bank, noted that the early closure of the FCNR-B window indicates that the response to the scheme has exceeded RBI estimate, with total inflows still expected to be robust at $70 billion against the earlier expectation of $80-90 billion. She also expects banks to push for FCNR-B deposits in the last two weeks of the scheme. Madan Sabnavis, Chief Economist, Bank of Baroda, observed that probably RBI is targeting a certain quantum of inflows and they have achieved it. V Rama Chandra Reddy, Head -Treasury, Karur Vysya Bank, said the early closure of the FCNR window looks more like calibration than a course correction. An economist with a private sector bank noted that since the FCNR-B inflows have been very encouraging, RBI may be encountering a 'we don't require so much' situation. SBI Research drew a contrast with the previous FCNR(B) drive in 2013, when the scheme played out against the backdrop of the global financial crisis, the eurozone's PIIGS crisis and the taper tantrum, forcing the RBI to raise policy rates and tighten liquidity sharply. The report noted that 2026 playbooks look different as of now but credible and sustainable macros mechanism are truly warranted.
