Context
Recently, the Reserve Bank of India (RBI) reported that its special USD–INR forex swap facility, launched in June 2026, mobilised about $73 billion in foreign exchange inflows within eleven weeks. Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits contributed about $65.4 billion.
Explanation
- A forex swap involves exchanging one currency for another with an agreement to reverse the transaction later at a predetermined rate.
- Under the special facility, RBI provides swap support for funds mobilised through FCNR(B) deposits, Overseas Foreign Currency Borrowings (OFCB) and External Commercial Borrowings (ECB).
- FCNR(B) accounts allow Non-Resident Indians (NRIs) to maintain term deposits in permitted foreign currencies with Indian banks.
- Since deposits are maintained in foreign currency, the depositor does not bear INR exchange-rate risk.
- ECBs are commercial borrowings raised by eligible Indian entities from recognised non-resident lenders, subject to RBI regulations.
- Such foreign-currency inflows increase the availability of dollars, support foreign exchange reserves and strengthen India’s external-sector liquidity buffers.
- The 2026 FCNR(B) window will close on August 31, 2026, earlier than initially planned.
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RBI Forex Swap: Boosting Dollar Inflows and Liquidity