The Reserve Bank of India (RBI) has introduced a US Dollar-Rupee Forex Swap Facility to support eligible External Commercial Borrowings (ECBs) and Overseas Foreign Currency Borrowings (OFCBs), as announced in the Governor’s Statement dated June 5, 2026. The initiative is aimed at facilitating hedging of foreign currency borrowings while providing greater certainty regarding exchange rate costs.
The facility is available for ECBs with an average maturity of three years or more, drawn between the date of the circular and December 31, 2026, by eligible Public Sector Undertakings (PSUs). Eligible entities include PSUs with majority ownership held by the Central or State Government, as well as those incorporated or established under a Central or State Act and controlled by the government. The facility also covers the undrawn portion of existing ECBs. However, it excludes ECBs containing embedded options and borrowings raised for refinancing or repayment of existing ECBs.
In addition, the facility is available for OFCBs raised by Authorised Dealer (AD) Category-I banks with a minimum maturity of three years. While ECBs and OFCBs may be raised in any foreign currency, the swap facility with RBI will be available only in US dollars. The maximum swap tenor will align with the repayment schedule or maturity of the underlying borrowing, subject to a cap of five years.
The swap facility will operate on all working days in Mumbai. Under the arrangement, banks can sell US dollars to RBI and simultaneously agree to repurchase the same amount at the end of the swap period. Transactions will be conducted in multiples of USD 1 million and priced at a fixed swap rate of 1.5% per annum, compounded semi-annually. The initial leg of the transaction will be settled at the FBIL Reference Rate on a spot basis. At maturity, banks will repay the rupee funds along with the applicable swap premium to receive the US dollars back.
Banks seeking to use the facility must submit a declaration confirming that the swap is being used to facilitate hedging of eligible ECB inflows or against eligible OFCBs received during the preceding weeks. The Financial Markets Operations Department (FMOD) of RBI will administer the facility and announce schedules for participation based on market conditions.
The scheme is effective immediately and will remain open until January 15, 2027, for eligible ECB drawdowns and OFCB inflows received up to December 31, 2026. Existing regulatory provisions governing ECBs and OFCBs will continue to apply, and banks will not be required to execute ISDA agreements with RBI for participation.
