EconomyThursday, 10 September 2026·The Hindu - Economy
RBI FCNR(B) swap facility: who bears the currency risk on deposits and interest?
The RBI’s June swap facility mobilised over $127 billion in FCNR(B) deposits and closed on August 31, 2026.
Key highlights
Direct fact
In June 2026, the Reserve Bank of India introduced a special swap facility to attract FCNR(B) deposits, and the window was closed on August 31, 2026 after banks mobilised more than $127 billion against an initial target of about $50 billion.
Key specifics
- FCNR(B) deposits typically have 3-to-5-year maturities, creating currency-risk questions at repayment.
- The RBI’s swap facility shields banks from foreign-exchange risk on the principal amount, but not on interest payments.
- SBI Research said the RBI had recouped $31.2 billion of foreign-currency assets by August 7, 2026, equal to 55% of the amount mobilised then.
- BofA Securities estimated hedging cost at up to 3%, while SBI Research used an average annual hedging cost of around 3%.
- India’s foreign-exchange reserves were cited at around $700 billion, with SBI Research estimating a five-year cost of 1.45% of reserve stock.
Exam lens
TNPSC economy question type: RBI scheme and currency-risk concept; remember June 2026, August 31, 2026, $127 billion mobilisation, $50 billion target, and the distinction between principal and interest risk.