The Reserve Bank of India has sounded out commercial banks for the reasons for the slower-than-expected response to its foreign-currency deposit scheme, which is trailing the pace of a similar 2013 effort that raised $26 billion. The dollar deposit programme was launched in June after surging crude prices and foreign fund outflows battered the currency, though initial inflows have so far fallen far short of expectations of $30-40 billion.
At a meeting on Wednesday with bank executives ahead of the bi-monthly monetary policy, RBI officials questioned banks why foreign currency non-resident bank (FCNR-B) deposit inflows have not picked up, two people aware of the discussions said. Under the scheme announced on 5 June, the central bank absorbs banks' currency hedging costs on fresh three- to five-year deposits.
Essentially, this means commercial lenders can offer non-resident Indians (NRIs) attractive dollar deposit rates. The central bank sought to know how much deposits can be gathered, and the challenges in attracting them, the people said on the condition of anonymity.
So far, Indian banks have gathered FCNR deposits of around $7 billion, several market participants said.
“It was a routine pre-policy meeting, and FCNR was one of the agenda items. The RBI wanted to understand where the flows are at, and why there is a slack in FCNR deposits,” one of the two people aware of the matter said.
“Banks told RBI that these were initial days and flows will soon pick up. Once the policy was announced, banks will have to get the product, tie up for leverage and therefore it is taking time. Once these are sorted, flows will start coming in,” the person added.
Bankers told the RBI that the slow pace was not unusual, and that FCNR deposits typically take time to gather momentum. “Last time also in 2013, it was slow in the first month. It will take time to pick up,” the second person confirmed, describing the industry’s response during the meeting chaired by RBI executive director Indranil Bhattacharya.
The meeting, which included 8-10 senior bank officials, discussed constraints that have limited the pace of FCNR(B) mobilization. “Dollar interest rates are going up,” the second person said, adding that rising overseas funding costs for banks have made such deposits harder to attract.
Queries emailed to the RBI on the matter remained unanswered.
Many NRIs are still undecided about investing in FCNR deposits due to persistent selling by foreign portfolio investors, which has also led the Indian rupee to depreciate significantly and to an overall evolving macroeconomic environment.
“Even though SBI may offer me 6.5% compared with 5% on a dollar deposit in the UK, the overall macroeconomic environment especially the stress on rates and the rupee makes it difficult to move and lock up money in India,” Ajay Marwaha, president and head of fixed income of Nuvama Group said.
On 14 July, Mint reported that RBI is set to meet bank officials as part of its customary pre-monetary policy consultations, with discussions expected to focus on accelerating mobilization of FCNR deposits, policy transmission and lending to productive sectors of the economy.
Besides FCNR deposits, the meeting also covered the regular pre-policy agenda, including transmission of policy rates to deposits and loans and the flow of credit to productive sectors of the economy. However, discussions largely centred on foreign currency deposit mobilization, following the RBI’s June measures aimed at boosting overseas inflows to protect the Indian rupee.
The central bank has asked banks to report daily data on FCNR deposits. Officials from the government and RBI have separately met bank chiefs on 13 and 14 July to nudge bankers to intensify their outreach programmes.
These meetings have come at a crucial time as geopolitical concerns that had briefly eased and supported the Indian rupee have escalated again after US President Donald Trump last week said that the interim peace deal with Iran was over.
The RBI’s Monetary Policy Committee is widely expected to keep policy rates unchanged at 5.25% at its upcoming meeting on 7 August.
Banks mobilized $166 million in fresh FCNR(B) deposits in April 2026, while the outstanding FCNR(B) deposit base stood at $33.92 billion at the end of April, up from $33.76 billion a month earlier, latest RBI data showed. Overall, NRI deposits across FCNR(B), non-resident external (NRE) and non-resident ordinary (NRO) accounts stood at $165.59 billion, indicating that FCNR(B) deposits account for roughly one-fifth of the total NRI deposit base. Updated data is unavailable as it comes with a lag.