According to the central bank's monthly bulletin, the growth of the Indian rupee, which had been observed earlier this month due to the inflow of FCNR (B) deposits under the Reserve Bank of India's (RBI) preferential swap window, weakened in the second half of September. This was caused by the increase in global crude oil prices.
Commercial banks attracted $133 billion in FCNR(B) deposits since the scheme launched in June. The scheme was closed one month earlier than planned—on September 30. By September, the Indian unit had depreciated by 0.7 percent, and since the war in West Asia began at the end of February, it had depreciated by 5 percent.
The article, written by RBI staff under the guidance of Deputy Governor Poonam Gupta, notes that tensions in the Middle East and high crude oil prices caused the depreciation of the Indian rupee (INR) for most of August. Although strong inflows of FCNR(B) deposits led to a short-term recovery in early September, this growth was offset by higher oil prices at the end of the month.
The report also indicated that strong FCNR(B) flows contributed to excess liquidity in August, which intensified in September. However, in the second half of September, the liquidity system stabilized due to tax-related outflows and liquidity support measures taken by the RBI. The volume of excess liquidity, measured by banks through the liquidity regulation mechanism window, decreased to 4.27 trillion rupees on Thursday.
Furthermore, the article noted that headline inflation rose slightly to 4.8 percent in August, driven by food and beverage product groups, as well as increases in fuel and essential component prices. It was also emphasized that core inflation, excluding precious metals, increased compared to the ultra-low levels of recent months.
Despite challenging global conditions, economic growth remained resilient. It was noted that the Indian economy demonstrated strong GDP growth in the first quarter of 2026-27. High-frequency indicators for August reflected sustained demand, with the industry and services sectors showing resilience. Overall, the economy performed well despite external difficulties.
The article also highlighted the strengthening of Foreign Direct Investment (FDI) inflows in July, when net FDI inflows reached $7.4 billion, the highest figure in five years. Net FDI inflows in June were $2.07 billion, and in May, only $79 million. Gross FDI inflows, excluding outflows from India, reached $14.6 billion in July compared to $8.8 billion in June and $6 billion in May.
The main sectors attracting FDI were communications, financial services, and computer services, which received over 80 percent of the net equity inflow in July. The main donor countries were Mauritius, UAE, and the USA, which provided about 70 percent of the net FDI equity inflow.
