RBI FCNR(B) Swap Window Closed Early: What NRIs Need to Know

Why RBI Closed the FCNR(B) Swap Window a Month Early, Despite Saying It Wouldn't

On August 5, RBI Governor Sanjay Malhotra said there was no proposal under consideration at that point to close the special FCNR(B) window early. Nine days later, RBI moved the deadline from September 30 to August 31. That looks like a reversal, but it is better read as a policy decision made after conditions changed quickly rather than as a broken commitment.

RBI’s reply to the deadline change was an “encouraging response,” and foreign exchange inflows followed. FCNR(B) deposits under the facility had reached USD 52.3 billion by August 13; by August 21, RBI data showed that figure at USD 65.397 billion. The window had attracted far more money, far faster than the market expected. This blog looks at the policy shift, what the RBI said, and what the early closure changes for NRI depositors.

What Happened Between August 5 and August 14

The RBI FCNR(B) swap window was originally meant to remain open for eligible deposits until September 30, 2026. After the August monetary-policy meeting, the Governor said no proposal to close it prematurely was under consideration at that time.

On August 14, RBI advanced the deposit cut-off to August 31 and allowed banks until September 11 to complete the swaps against those eligible deposits. The External Commercial Borrowings (ECB) and Overseas Foreign Currency Borrowings (OFCB) swap facilities were left unchanged and continue until December 31.

Did RBI Actually Say the Window Would Not Close Early

The Governor did not announce a binding commitment to keep the FCNR(B) swap facility open until September 30 regardless of future inflows. He said no proposal was under consideration as of August 5.

That distinction matters because the later action came after another week of deposits. The sharp timeline still surprised banks and market participants, as the public statement and the later decision are not quite the same.

How Strong Were the FCNR(B) Inflows

The numbers explain why the discussion changed so quickly. By August 13, banks had mobilised USD 52.3 billion of FCNR(B) deposits under the special swap facility. Total inflows across FCNR(B), Overseas Foreign Currency Borrowings and External Commercial Borrowings were USD 56.846 billion.

RBI’s August 22 update showed FCNR(B) deposits at USD 65.397 billion as of August 21, while total inflows across all three windows had reached USD 72.848 billion. In other words, the facility continued pulling in large foreign currency even after the revised closure was announced.

Why Did RBI Close the FCNR(B) Swap Window Early

RBI’s stated reason was the encouraging response and the resultant forex inflows. Once the FCNR(B) swap window had already brought in tens of billions of dollars, keeping the concessional facility open for another month may have offered less incremental policy value.

SBI Research reached a similar interpretation, arguing that the most likely explanation was that the inflow of foreign currency objective had effectively been achieved. That is an analytical view rather than an RBI statement, but it fits the timing better, as the facility was not closed because it failed to attract deposits.

Was the Cost of the Swap the Main Reason

There was market discussion about the cost to the RBI providing the hedge. SBI Research estimated that even a sizeable cumulative cost over the deposit tenures would remain small relative to India’s foreign-exchange reserve buffer, and said the cost was unlikely to be the main reason for early closure.

What Does the Early FCNR(B) Deadline Mean for NRIs

For an NRI, the policy change matters through bank pricing, not because RBI directly accepts the deposit. The FCNR fixed deposit is still booked with the bank. The swap facility sits between the bank and RBI and can influence the economics of eligible 3 to 5 year USD deposits.

Current USD FCNR(B) rate card effective August 20 shows 6.25% annually for 3 years to less than 4 years and 6.30% annually for 4 years to less than 5 years and for 5 years. These rates are live product rates, not guaranteed post-August 31 rates, and they can change at any time.

What Happens to FCNR(B) Deposits After August 31

The regular FCNR deposit for NRI customers continues after the special RBI FCNR(B) swap window closes. NRIs can still book FCNR(B) deposits in permitted currencies and tenures under normal rules. What disappears is the special swap rate for new deposits after the cut-off.

That distinction should guide the decision. If a 3 to 5 year USD FCNR fixed deposit already fits your portfolio, the current window is relevant. If you need the funds sooner, prefer another currency, or are booking only because the deadline feels urgent, the headline shouldn't drive the investment decision.

Conclusion

Although the August shift came abruptly for NRIs, the key takeaway is that the special swap-linked opportunity now has a fixed end date. Taking advantage of it depends on the availability of foreign funds, tenure flexibility, and liquidity.

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