Forty-two days, 17 billion dollars: A glimpse of India's FCNR show

Mumbai: Non-resident Indians (NRIs) have poured $17.41 billion into Indian banks through foreign currency non-resident (FCNR) deposits under a new deposit incentive scheme, recording a promising start to the campaign to attract dollars and strengthen the rupee. Announced on 5 June and rolled out three days later, the scheme allows NRIs to make leveraged deposits and runs till the end of September, with the central bank taking the hedging risk, offering overseas investors the potential to earn up to 14% return on their money.

The Reserve Bank of India (RBI) on Monday said its dollar swap facility received a total of $20.72 billion till 17 July, with FCNR-B deposits accounting for the lion’s share. Apart from FCNR(B) deposits, the swap window also received $1.97 billion in overseas foreign currency borrowings and $1.34 billion through external commercial borrowings. Commercial banks exchange dollars for rupees at the swap window at guaranteed rates.

“The swap facility has seen avid interest and attracted steady forex inflows since June 8, 2026,” the RBI said in a press release accompanying the data.

The official data comes after weeks of uncertainty over the pace of deposit flows. On Monday, Mint reported that while private sector lenders repeatedly described customer interest as strong during their June-quarter earnings calls, most refrained from disclosing deposit inflows, saying it was too early to provide estimates. On the other hand, public sector banks had begun revealing both collections and targets.

'Healthy start'

Gaura Sengupta, chief economist at IDFC First Bank, termed it a “very healthy start" to the capital inflow scheme. "Given the pace, there could be upside risk to our estimate of overall FCNR-B inflows of $50 billion due to the scheme,” she said, adding major flows are expected in August and September.

“For ECB, we maintain an additional inflow of $20 billion,” Sengupta said. “FY27 BoP surplus is expected to be moderate at $25 billion, and this will help moderate the pace of rupee depreciation,” she added.

The central bank had introduced the concessional swap window for FCNR as part of a broader package of measures to incentivize capital inflows and strengthen India’s balance of payments amid global uncertainties. Under the facility, banks can raise fresh FCNR-B deposits and swap the dollars with the RBI at a concessional rate. The FCNR-B window remains open until 30 September, while the facility for OFCBs and ECBs is available until 31 December.

“This is an excellent indication of what kind of funds could flow in under the scheme,” said Ashok Chandra, managing director and chief executive of Punjab National Bank. Chandra said it was widely expected that flows would pick up after 15 August and continue till the scheme's end. “Today’s RBI disclosures show that there could even be an upside to initial estimates,” he said. The state-owned lender is targeting $2.5 billion FCNR deposits, and has so far received $425 million.

On 16 July, Mint had reported, citing market participants, that the banking system may have witnessed FCNR-B inflows of $12-15 billion ever since the scheme was launched.

Selective targets

Mint has reported that banks are selectively choosing FCNR-B deposits from NRIs with over $1 million, as overseas funding costs rise. Smaller leveraged deposits are becoming infeasible, which could undermine India's goal of attracting $30-40 billion in inflows.

Bankers initially grappled with tax-related concerns among NRIs in markets such as the US and the UK, uncertainty over the eventual source of flows, and operational clarifications that came only later in June, prompting the RBI and the government to separately meet lenders in mid-July to push for faster mobilization.

Mint also reported that domestic banks do not expect significant FCNR-B deposit inflows from the US as many NRIs there remain wary due to stricter tax scrutiny and compliance challenges following the 2013 programme.

Officials from the central bank and the Union finance ministry have separately met top bank executives over the incentivized FCNR scheme.

Barclays had expected potential FCNR flows of $25–30 billion as a reasonable base case over the next few months, with upside risks but did not expect a repeat of the large inflows seen in 2013, it said in a report on 16 July.

“The pace of take-up so far has indeed been lower than the run rate that would be expected by the lofty market expectations of around $40-50 billion, with some having expected inflows of up to $70 billion,” the report had said.