RBI Announces FCNR(B) Swap Facility, CRR And SLR Exemptions

New Delhi, Jun 9 (KNN) The Reserve Bank of India (RBI) has introduced a US dollar-rupee forex swap facility for banks mobilising fresh Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits with maturities ranging from three to five years, as part of measures to attract foreign currency inflows.

RBI Launches Forex Swap Facility For FCNR(B) Deposits

Under the scheme, authorised dealer category-I banks can access the facility for eligible FCNR(B) deposits raised in any freely convertible currency. However, swap transactions with the RBI will be conducted only in US dollars, reported Business Standard.

The central bank also exempted fresh FCNR(B) deposits mobilised between the date of the circular and September 30, 2026, from the maintenance of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR), provided the deposits have a minimum tenor of three years and a maximum tenor of five years.

Swap Tenor To Match Underlying Deposits

According to the RBI, the tenor of the swap facility will match the tenor of the underlying deposit. For deposits raised in currencies other than the US dollar, banks may convert the amount into equivalent US dollars using prevailing market exchange rates on the day of the swap transaction.

Banks will be permitted to avail the swap facility once every week. The maximum amount eligible for swapping in a given week will be equivalent to the aggregate eligible FCNR(B) deposits mobilised during preceding weeks for which the facility has not already been utilised.

Under the arrangement, banks can sell US dollars to the RBI in multiples of USD 1 million and simultaneously agree to repurchase the same amount at the end of the swap period. Both legs of the transaction will be executed at the same exchange rate, with the RBI undertaking the swap at par.

One-Year Lock-In Applicable On Deposits

The central bank stated that 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 executed with the RBI cannot be cancelled.

The facility comes into immediate effect and will remain available until October 16, 2026, for eligible deposits mobilised up to September 30, 2026.

Measure Aims To Boost Foreign Currency Inflows

The move follows the RBI's recent announcement that it would bear the full hedging cost on fresh three- to five-year FCNR(B) deposits raised by banks during the specified period.

Market participants expect the scheme to enable banks to offer NRI deposit rates that are 150-200 basis points higher than existing levels, thereby enhancing the attractiveness of FCNR(B) deposits and supporting foreign currency inflows.

While some analysts believe the facility could attract substantial inflows similar to the FCNR(B) swap programme introduced in 2013, others expect a more moderate response given current global financial conditions.

(KNN Bureau)