India’s FCNR(B) Inflows Top $100B, RBI Closes Window Early, Boosting FX Reserves

⚡ Key Financial Takeaways

FCNR(B) inflows crossed $100B by Aug 31, exceeding the $80B projection and prompting RBI to close the window a month early.

RBI’s swap facility attracted ECB and OFCB inflows; total inflows across FCNR(B), ECB, OFCB reached $72.85B as of Aug 21, with most in five‑year FCNR(B) deposits.

The capital account surplus is projected to rise above $65B this FY, helping the rupee appreciate and adding to India’s record $729.33B foreign‑exchange reserves.

FCNR(B) Inflows Surpass Expectations RBI’s Foreign Currency Non‑Resident (Bank) deposit window closed on August 31 after attracting more than $100 billion, far exceeding the $80 billion target set for the three‑month period. The surge in dollar‑denominated, tax‑free deposits from NRIs prompted the central bank to shut the scheme a month ahead of its original September 30 deadline, citing concerns over reversal risks and the need for a data‑driven response.

RBI’s Swap Facility and FX Market Impact Alongside FCNR(B), RBI’s special swap window continued to draw additional capital through External Commercial Borrowings (ECBs) and Overseas Foreign Currency Borrowings (OFCBs). As of August 21, total inflows across all three schemes were $72.85 billion—$65.4 billion from FCNR(B), $4.86 billion from OFCBs and $2.59 billion from ECBs. The swap deposits have a minimum maturity of three years and a maximum of five years, with the bulk concentrated in the five‑year tranche. This influx has bolstered RBI’s balance‑sheet foreign‑currency assets and reinforced its ability to intervene in the FX market.

Implications for Balance of Payments and Rupee The capital account surplus for the current fiscal year is now expected to exceed $65 billion, reversing deficits recorded over the previous two years. Despite an $8 billion depletion of foreign‑exchange reserves in the April‑June quarter, the strong inflows have helped lift the rupee—up 22 paise to ₹94.95 per dollar—and provide a floor for the currency against a backdrop of geopolitical volatility. RBI Governor Sanjay Malhotra described the early closure as a “well‑thought‑out, calibrated, prudent and data‑driven” move, while Chief Economic Adviser V Anantha Nageswaran highlighted the role of FCNR(B) mobilization in supporting the rupee’s stability.