RBI's special dollar swap window draws $136 billion by 31 August
Where it stands
The Reserve Bank of India (RBI) opened a special dollar-rupee swap facility on 8 June 2026. Banks could raise fresh Foreign Currency Non-Resident (Bank), or FCNR(B), deposits from non-resident Indians. Banks then swapped those dollars with the RBI for rupees. The RBI bore the full hedging cost. The FCNR(B) window closed early on 31 August 2026. On 2 September 2026 the RBI said banks had raised $127.23 billion through FCNR(B) deposits. Overseas borrowings added $5.26 billion. External commercial borrowings added $3.89 billion. Total inflows were $136.38 billion. The RBI calls these figures provisional. The rupees pushed the banking liquidity surplus to Rs 7.76 trillion on 1 September. The overnight call rate fell to 5.02 per cent on 2 September.
Background
An FCNR(B) deposit is a bank deposit held in a foreign currency by a non-resident Indian. The bank owes those dollars back to the depositor later. Under the 2026 facility the bank sold the dollars to the RBI for rupees. The bank will buy the same dollars back at the same exchange rate when the swap ends. Eligible deposits run for three to five years, with a one-year lock-in. Such deposits were also freed from the cash reserve ratio and the statutory liquidity ratio. The RBI ran a similar window in 2013 under Governor Raghuram Rajan. The 2013 windows brought in about $34 billion between September and November 2013.
How it developed
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5 June to 8 June 2026How it started
RBI announced the swap facility on 5 June 2026 to attract dollars
RBI Governor Sanjay Malhotra announced the measures on 5 June 2026. The Governor cited the West Asia conflict and high energy prices. Net foreign portfolio outflows had reached $13.7 billion since 1 April 2026. The RBI offered to bear the full hedging cost on fresh three-to-five-year FCNR(B) deposits. The RBI also offered a concessional swap for external commercial borrowings by public sector units. The facility opened on 8 June 2026. The FCNR(B) window was to run until 30 September 2026. The RBI used the same tool in September 2013 under Governor Raghuram Rajan. The 2013 swap cost banks a fixed 3.5 per cent a year. The 2013 windows raised about $34 billion by 30 November.
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14 August 2026New fact
RBI closes the FCNR(B) window a month early, on 31 August
On 14 August 2026 the RBI moved the FCNR(B) deadline from 30 September to 31 August 2026. The RBI cited the encouraging response and the resulting forex inflows. Inflows had reached $56.85 billion by 13 August. FCNR(B) deposits made up $52.3 billion of that total. Banks got until 11 September 2026 to complete swaps on eligible deposits. Nine days earlier Governor Malhotra had said there was no proposal to close the scheme early.
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31 August to 1 September 2026Consequence
Window shuts on 31 August as liquidity hits a four-year high
The FCNR(B) window closed on 31 August 2026. The liquidity surplus in the banking system reached Rs 6.65 trillion on 31 August. Business Standard called the surplus the highest since 19 April 2022. On 1 September the RBI offered to absorb Rs 10 trillion through two reverse repo auctions. Banks parked only Rs 3.74 trillion. The rupee closed at 94.95 to the dollar on 1 September, a two-month high.
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2 September 2026New fact
RBI counts $127.23 billion from FCNR(B) deposits, $136.38 billion in all
The RBI released the full tally on 2 September 2026. Banks raised $127.23 billion through FCNR(B) deposits by 31 August. Borrowings added $9.15 billion, taking the total to $136.38 billion. Inflows had stood at only $72.85 billion on 21 August. Business Standard said the market had expected $90-100 billion. ICICI Bank alone raised $17.88 billion.
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2 September 2026Consequence
Liquidity surplus tops Rs 7.75 trillion, call rate falls to 5.02 per cent
The liquidity surplus rose to Rs 7.76 trillion on 1 September 2026. On 2 September the RBI offered to absorb Rs 5 trillion through an overnight reverse repo auction. Banks offered Rs 4.6 trillion. The weighted average call rate settled at 5.02 per cent, down from 5.16 per cent. The call rate is now close to the standing deposit facility rate of 5 per cent. The RBI announced another Rs 6 trillion auction for 3 September.
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2 September 2026, nightNew fact
GIFT City banks sanctioned $54 billion under the swap facility
Banks at GIFT City in Gujarat took a large share of the swap money. The International Financial Services Centres Authority (IFSCA) released the figures on 2 September 2026. Twenty international banking units at GIFT-IFSC sanctioned $54.02 billion under the facility by 31 August. The units disbursed $52.82 billion. Sanctions stood at $28.60 billion on 14 August and $37.26 billion on 21 August. The units raised the money in the United Kingdom, the United States, Mexico, West Asia, Hong Kong, Singapore and Africa. The facility for external commercial borrowings and overseas borrowings stays open until 31 December 2026.
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3 September 2026, morningConsequence
Rupee rises to 94.27, its strongest since June, on the inflows
On 3 September 2026, the rupee opened 69 paise stronger at 94.29 to the dollar. The rupee touched 94.27 in morning trade. That is the strongest level since 29 June 2026. The rupee had closed at 94.98 on 2 September. Dealers credited the dollar inflows under the swap facility. The inflows were well above the $80 billion to $90 billion economists had expected. The larger reserves give the Reserve Bank of India more room to steady the rupee. A treasury adviser said the RBI can now cover its short-term dollar positions from these deposits.
Why it matters for UPSC
For GS3, the story joins external sector management with liquidity management. A swap is not a loan and not a gift. The RBI holds the dollars only for the life of the swap. The RBI must return the same dollars when each swap ends. Reserves rise now. A liability to return the dollars rises too. For Prelims, keep the deposit types apart. An NRE deposit is held in rupees. An FCNR(B) deposit is held in foreign currency. The weighted average call rate is the operating target of monetary policy.
Key terms
Sources (14)
- Reserve Bank of India · official · Governor's Statement: June 05, 20263 Sep, 12:05 am
- Business Standard · RBI's special forex swap window outpaces 2013 inflows in only weeks (1 August 2026)2 Sep, 11:50 pm
- PTI · RBI happy with reduction in exchange rate volatility: Rajan (18 December 2013, Business Standard copy)2 Sep, 11:50 pm
- Reserve Bank of India · official · Forex inflows via FCNR(B) Deposits, External Commercial Borrowings (ECBs) and Overseas Foreign Currency Borrowings (OFCBs) under Reserve Bank's Swap facility (14 August 2026)3 Sep, 12:05 am
- Business Standard · Inflows over $52 bn, RBI opts to shut FCNR(B) tap ahead of schedule2 Sep, 11:50 pm
- Business Today · RBI limits FCNR(B) forex swap facility after $52.3 bn inflows; ECB, OFCB window stays open2 Sep, 11:50 pm
- Reserve Bank of India · official · Data on Forex inflows via FCNR(B) Deposits, External Commercial Borrowings (ECBs) and Overseas Foreign Currency Borrowings (OFCBs) under Reserve Bank's Swap facility (2 September 2026)3 Sep, 12:05 am
- Business Standard · Strong FCNR(B) flows drive excess liquidity to 4-year high of ₹6.65 trn (1 September 2026)2 Sep, 11:50 pm
- IANS · RBI's dollar-rupee swap facility draws $136.38 billion foreign currency inflows, FCNR(B) deposits lead surge2 Sep, 11:50 pm
- Business Standard · FCNR (B) haul soars to $127 bn on final sprint exceeding mkt expectations2 Sep, 11:50 pm
- Reserve Bank of India · official · Result of the Overnight Variable Rate Reverse Repo (VRRR) auction held on September 02, 20263 Sep, 12:05 am
- Business Standard · Liquidity surplus tops ₹7.75 trillion on strong FCNR (B) mobilisation2 Sep, 11:50 pm
- Business Standard · GIFT-IFSC banks sanction $54 billion under RBI's FCNR(B) swap facility (2 September 2026)3 Sep, 10:20 am
- Business Standard · Rupee gains 69 paise, hits highest level since June on bumper FCNR inflows (3 September 2026)3 Sep, 10:30 am