RBI NRI Deposit Scheme: The RBI’s special initiative to attract dollar deposits from NRIs has been highly successful. Over $100 billion has been deposited in India through Foreign Currency Non-Resident—or FCNR(B)—deposits. Given the rapid inflow of dollars, the RBI closed the special swap facility window for this scheme about a month ahead of schedule. This surge in inflows has also pushed the country’s forex reserves to record levels. As of August 21, the country’s foreign exchange reserves stood at $729.3 billion; just a few weeks earlier, on July 24, they had stood at approximately $682 billion.
Pressure on the dollar due to the ongoing conflict in the Middle East
The RBI took this step amid the ongoing conflict in the Middle East and fluctuations in crude oil prices. These factors had placed significant pressure on India’s external accounts and the rupee. According to reports, India’s forex reserves fell by about $46 billion after tensions between the US and Iran began in February this year. During this period, reserves dropped to $682 billion by July 24, while the rupee depreciated by nearly 6% against the US dollar. Against this backdrop, the RBI promoted FCNR(B) deposits to encourage foreign currency inflows.
What is an FCNR(B) deposit?
FCNR(B) stands for Foreign Currency Non-Resident (Bank) deposit. This account functions as a fixed-term deposit for NRIs, allowing them to deposit their overseas earnings in India. They are not required to convert their funds into Indian rupees. A key feature of this account is that both the principal amount and the accrued interest are repaid in foreign currency; consequently, NRIs are shielded from the risk of rupee-linked currency fluctuations.
Why was the swap facility introduced?
Inflows into FCNR(B) deposits had previously weakened. While the financial year 2024-25 saw inflows exceeding $7 billion through this channel, the figure dropped to $946 million in the financial year 2026. To boost inflows again, the RBI announced a special swap facility in June 2026. Under this scheme, banks were offered a swap facility for new FCNR(B) deposits with tenures ranging from 3 to 5 years, with the RBI bearing the hedging costs. The objective was to provide NRIs with a more attractive option for depositing foreign currency in the country.
Higher-than-expected inflows
RBI Governor Sanjay Malhotra stated that while initial expectations were for inflows of around $80 billion, the actual deposits exceeded projections. By early August, inflows had reached approximately $40.8 billion. By August 31, total FCNR(B) deposits crossed the $100 billion mark. Given this rapid influx, the RBI did not wait for the September 30, 2026 deadline and discontinued the special swap facility a month early.
Boost to the Rupee and Forex Reserves
According to reports, the country’s foreign exchange reserves rose to $729.3 billion by August 21, up from approximately $682 billion on July 24. Such substantial foreign currency reserves can help finance the current account deficit and buffer against external shocks. The rupee also benefited from this development. Media reports indicate that the rupee strengthened by 0.4 per cent in September, reaching 94.7988 against the dollar. The currency had already strengthened significantly after July 1; during this period, the RBI also intervened by selling dollars in both offshore and onshore markets.
The RBI had previously received dollar inflows from NRIs. Mobilising foreign funds from NRIs was not a novel step for the RBI given the prevailing economic conditions; foreign currency from non-resident Indians had been utilised during the 1991 balance-of-payments crisis. Subsequently, in 2013, $34 billion was mobilised due to significant pressure on the rupee. Notably, a foreign currency inflow exceeding $100 billion demonstrates that NRI deposits can serve as a vital channel for accumulating foreign currency for India during times of crisis.