RBI launches twin USD-INR forex swap facilities to attract foreign currency inflows and support external financing
New Delhi, June 8
The Reserve Bank of India announced two special US Dollar-Rupee forex swap facilities, one for fresh Foreign Currency Non-Resident deposits and another for eligible External Commercial Borrowings and Overseas Foreign Currency Borrowings, in a move aimed at attracting foreign currency inflows and supporting external financing.
The measures follow RBI Governor Sanjay Malhotra's announcement in the monetary policy statement on June 5.
In a circular on FCNR(B) deposits, the central bank said, "It has been decided to introduce a US Dollar-Rupee Forex Swap Facility for fresh FCNR (B) deposits, mobilised for a minimum tenor of three years and maximum tenor of five years."
Under the scheme, authorised dealer (AD) Category-I banks will be able to access the swap facility for fresh FCNR(B) deposits raised in any freely convertible currency, although the swap with RBI will be available only in US dollars. The tenor of the swap will mirror the tenor of the underlying deposit, ranging between three and five years.
The RBI further said, "The swap will be undertaken at par," allowing banks to sell US dollars to the central bank and simultaneously agree to buy back the same amount at the end of the swap period.
The FCNR(B) swap facility has come into effect immediately and will remain available until October 16, 2026, for deposits mobilised up to September 30, 2026.
In a separate circular, the RBI announced a forex swap facility for eligible ECBs raised by public sector undertakings (PSUs) and OFCBs raised by banks.
The central bank said, "It has been decided to introduce a US Dollar-Rupee Forex Swap Facility for (a) External Commercial Borrowings (ECBs) of average maturity of three years and above..." as well as "(b) Overseas Foreign Currency Borrowings (OFCBs) raised by Authorised Dealer Category I banks for a minimum maturity of 3 years."
According to the RBI, the swap facility will be available for eligible ECBs and OFCBs raised in any currency, though the swap transaction with the central bank will be conducted only in US dollars. The maximum swap tenor will be aligned with the repayment schedule or maturity of the borrowing, subject to a cap of five years.
The RBI said the facility would operate daily on working days and that banks could swap an amount equivalent to eligible ECB or OFCB inflows received during the preceding weeks. The swaps will be conducted at "a fixed rate of 1.5 per cent per annum compounded semi-annually."
The ECB/OFCB swap facility will remain open until January 15, 2027, for eligible ECB drawdowns and OFCB inflows received up to December 31, 2026.
RBI's twin facilities are measures to encourage foreign currency inflows, improve hedging options for banks and borrowers, and strengthen the country's external sector buffers amid evolving global financial conditions.
— ANI
Reader Comments
Finally, some relief for the rupee! The ₹ pressure has been real lately with all the global uncertainty. Hope this actually brings in the dollars needed. But let's be honest, these aren't FII inflows that boost our markets instantly - it's more like plugging a leaky bucket. Good for external sector buffers though! 💰
As someone working in banking, this is a well-thought-out measure. The FCNR(B) swap at par is particularly attractive - it essentially gives banks a zero-cost hedge while RBI gets dollars. The ECB facility at 1.5% per annum is reasonable given current hedging costs in offshore markets. However, I wonder if three years is long enough to make a real dent in the external financing gap. Let's see how much these facilities actually pull in.
Interesting move from RBI. Reminds me of similar windows opened in 2013-14 when India faced taper tantrum pressures. The timing makes sense with global liquidity conditions tightening. But India's current forex reserves seem more comfortable than a decade ago, so this seems more pre-emptive than emergency-driven. Good to see policy learning across cycles.
One question: Will these dollar inflows ultimately help control inflation? Import costs have been killing us with commodities priced in dollars. If this strengthens the rupee, maybe we'll see some relief at the petrol pump and in kitchen budgets. But these schemes are so technical - hope the common person actually benefits from it! 🙏
Practical stabilization measures. The 5-year cap on ECB swaps is a bit short for infrastructure projects that P
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