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RBI measures on FCNR(B) deposits to boost foreign currency inflows and banking liquidity

ICICIdirect Research 12 Jun 2026 DISCLAIMER

RBI has announced special dispensation allowing banks to raise Foreign Currency Non-Resident (Bank) or FCNR(B) deposit wherein hedging cost on deposit with tenure of 3-5 years, raised till 30 September 2026 will be borne by the central bank.
This special incentive bearing full hedging cost, significantly reduces effective cost of raising foreign currency liabilities for banks. The move comes at a time when net FCNR(B) inflows declined sharply by 87% in FY26, reflecting weak overseas deposit mobilization amid elevated hedging costs (~3-3.2%) and challenging liability conditions.
The revised framework has prompted banks to aggressively revise FCNR(B) deposit rates, with several lenders now offering up to 6–7% on USD deposits, materially higher than earlier levels, while maintaining profitability due to RBI’s swap support. Industry estimates suggest the banking system could mobilize US$35–40 billion through this route, with broader RBI measures potentially attracting even larger foreign capital inflows.
From a banking perspective, the scheme provides an alternative funding source at a time when domestic deposit mobilization remains challenging. Banks with a strong NRI franchise are expected to benefit through FCNR(B) deposit inflow, while incremental dollar inflows could support rupee stability and ease system-wide liquidity conditions. Thus, the move remains positive for banks – large private sector banks, SBI and regional banks like Federal Bank and South Indian Bank remain key beneficiaries.

Concessional forex swap for CPSE to aid currency along with as well as borrowing cost of CPSE

The Reserve Bank of India has announced a concessional forex swap facility for public sector enterprises to encourage overseas fundraising and support foreign currency inflows amid heightened volatility in currency market. Under this facility, PSUs can swap foreign currency borrowings (with tenure of 3-5 years) with RBI at a concessional fixed rate of 1.5% per annum (compounded semi-annually)
PSU undertakings, which typically raise $10–12 billion annually through ECBs, are expected to fast-track borrowing plans which will aid support to currency as well as diversify borrowing sources for PSUs. Some of entities in financial domain to undertake borrowing through ECB could include PFC, REC, IREDA.

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