RBI to close FCNR(B) swaps a month earlier due to gush

"Based on the encouraging response to the swap facility for FCNR(B) deposits and resultant forex inflows, it has been decided that the swap facility for FCNR(B) deposits will be available only for deposits mobilised till August 31," RBI said. "The swaps under this facility, that is, FCNR(B) deposits, may be availed with RBI till September 11, 2026." However, the swap scheme for external commercial borrowings (ECBs) and overseas foreign currency borrowings (OFCBs) will continue until December 31, as planned, RBI said.

**Contrary to Guv Remarks **

The facility, operationalised on June 8 to boost dollar inflows and strengthen foreign exchange reserves, allows banks to swap eligible overseas borrowings with the central bank at concessional rates, significantly lowering their cost of funds. Banks can swap FCNR(B) with the RBI under a zero-cost hedging facility available until September 11.Total foreign inflows from the special measures announced by the RBI stood at $56.84 billion until August 13, up from $40.81 billion reported as of July 31. FCNR(B) deposits accounted for most of the inflows at $52.30 billion.

Dollar inflows from ECBs and OFCBs were comparatively modest at $1.74 billion and $2.80 billion, respectively, RBI data showed.

The comments came in response to concerns over the need to continue subsidising the swap facility, given that India is in a much stronger position than in 2013, when the FCNR(B) scheme was launched during the taper tantrum, with substantially higher foreign exchange reserves.

India's foreign exchange reserves rose $14.1 billion to $707 billion in the week ended August 7, the highest level in this fiscal year.

Malhotra, however, had indicated that RBI was comfortable keeping the window open until the announced deadline. Asked whether the inflows had met the RBI's objectives on the balance of payments, liquidity and reserve adequacy, Malhotra said, "Yes, as of now, it has ticked all the boxes."

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