According to RBI Governor Sanjaya Malhotra, nearly half of the attracted funds amounting to USD 127.2 billion in the form of FCNR(B) deposits through the preferential swap scheme have a five-year tenure.
In an interview with CNBC-TV18 on Friday, Malhotra stated that about 48.50 percent of FCNR(B) deposits are five-year, approximately 42 percent are three-year and up to four-year, and the remaining about 9 percent fall in the range of four to five years.
Domestic banks offered the highest interest rates for five-year FCNR(B) deposits, with some institutions offering rates exceeding 7 percent.
As per the latest RBI data, as of August 31, banks had attracted USD 127.2 billion in FCNR(B) deposits under this scheme. The period for FCNR(B) closed on August 31, while programs for External Commercial Borrowings (ECBs) and Overseas Foreign Currency Borrowings (OFCBs) will remain open until December 31, 2026. To date, banks have attracted USD 5.3 billion through OFCB and USD 3.9 billion through ECBs.
The attraction of FCNR(B) funds sharply accelerated in the last week before the deadline, increasing from USD 65.4 billion on August 21 to USD 127.2 billion, surpassing market expectations of USD 90–100 billion at the end of the period. Deposits attracted under this scheme have maturities ranging from three to five years, with the majority of inflows falling into the five-year segment.
Malhotra noted that such flows are very stable and reflect strong confidence by global investors in the country's extremely strong macroeconomic fundamentals. He added that this demonstrates the ability to attract foreign and capital flows in a short period, which contributes to financial stability and the resilience of the external sector. He expressed satisfaction with the outcome.
Furthermore, he emphasized that absorbing the entire hedging cost of RBI for FCNR(B) deposits will lead to a net increase in income and additional revenue for the central bank.
Commenting on comparisons with the benchmark three-year forward premium, Malhotra stated that this is an incorrect approach. He believes the price was fair, and that it was important from the perspective of India's economy and the resilience of the external sector mentioned earlier, given that the market there is very narrow and few transactions occur in a year.
RBI launched the preferential swap scheme for new FCNR(B), OFCB, and ECB deposits on June 8. The initial deadline for the FCNR(B) window was set for September 30, 2026, but the central bank moved it forward by one month after receiving a strong response.
ICICI Bank, the country's second-largest private lender, reported attracting USD 17.9 billion in FCNR(B) deposits through this scheme. State Bank of India (SBI), the country's largest lender, also exceeded its target of USD 10 billion for FCNR(B) mobilization. Bank of India attracted almost USD 2.4 billion, and the public Indian Bank collected USD 2.3 billion. The central bank attracted over USD 900 million. RBL Bank attracted USD 3.4 billion, and IDFC First Bank attracted USD 3.5 billion, while the public Bank of Baroda collected almost USD 8 billion.
These funds are already being directed to the credit market. According to a press release from the International Financial Services Centres Authority (IFSCA), public banks have issued loans worth USD 52.8 billion through their International Financial Services Centres (IFSC) banking units in GIFT City, out of a total approved loan amount of USD 54.02 billion.
IFSCA also reported that the volume of ECBs issued through IFSC banking units amounted to USD 11.62 billion from April to August, while Indian banks attracted USD 11.12 billion through bond issuances on IFSC exchanges during the same period.
