The Reserve Bank of India (RBI) has announced a special USD-INR Forex Swap Facility for fresh Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits, aimed at encouraging foreign currency inflows and strengthening the country’s external sector position. The facility, which became effective immediately following the Governor’s Statement dated June 5, 2026, will remain available for eligible deposits mobilized up to September 30, 2026, with swap transactions permitted until October 16, 2026.
Under the scheme, Authorized Dealer (AD) Category-I banks can access the swap facility for fresh FCNR(B) deposits mobilized in any freely convertible currency, including renewed deposits. However, the swap transaction with RBI will be conducted only in US Dollars. Eligible deposits must have a minimum tenor of three years and a maximum tenor of five years, with the tenor of the swap matching the tenor of the underlying deposit.
The facility allows banks to sell US Dollars to RBI and simultaneously agree to buy back the same amount at the end of the swap period. The first leg of the transaction will be settled at the Financial Benchmarks India Pvt. Ltd. (FBIL) Reference Rate on a spot basis, while the reverse leg will occur at the same exchange rate. Importantly, the swap will be undertaken at par, thereby eliminating exchange rate risk for participating banks.
To ensure operational discipline, banks may avail themselves of the facility only once per week. The maximum amount eligible for swapping in a given week will correspond to the aggregate eligible FCNR(B) deposits mobilized during preceding weeks for which the facility has not already been utilized. Banks must maintain separate records and a clear audit trail for all deposits covered under the scheme.
The underlying FCNR(B) deposits will be subject to a one-year lock-in period. While banks may permit premature withdrawal after one year in accordance with their internal policies, swaps undertaken with RBI cannot be cancelled. Furthermore, banks are not required to execute an ISDA agreement with RBI for participation.
The RBI has clarified that all other existing FCNR(B) regulations will continue to apply. However, the provisions of Paragraph 402 of the Reserve Bank of India (Commercial Banks – Credit Facilities) Directions, 2025 will not apply to deposits mobilized under this facility.
This initiative is expected to enhance foreign currency deposit mobilization, support banking sector liquidity, and contribute to overall financial stability.
