RBI Forex Swap Facility Attracts Over $20.7 Billion

The Reserve Bank of India’s concessional forex swap facility had attracted over $20.7 billion, or about ₹2 lakh crore, in foreign exchange inflows by 17 July 2026. The facility was announced on 5 June 2026 and became operational on 8 June 2026 to support India’s balance of payments and encourage capital inflows.

Forex Swap Facility

A forex swap facility is a foreign exchange arrangement in which the central bank provides a swap cover for eligible foreign currency liabilities. In this case, the RBI covers the full hedging cost for certain inflows, which reduces the cost for banks and depositors.

Major Components of Inflows

Foreign Currency Non-Resident (Bank) deposits formed the largest share of the inflows at 17.406 billion by 17 July 2026. Overseas Foreign Currency Borrowings contributed 1.97 billion, while External Commercial Borrowings added $1.342 billion during the same period.

Hedging Cost and Deposit Rates

The RBI absorbs the hedging cost of about 280 to 300 basis points per annum for FCNR(B) deposits. This arrangement has allowed banks to offer USD deposit rates of 5.5% to 7.1%, compared with the earlier range of 2% to 4%.

Validity and Coverage

The concessional swap facility for FCNR(B) deposits remains available until 30 September 2026. The facility for Overseas Foreign Currency Borrowings and External Commercial Borrowings continues until 31 December 2026. The swap facility covers only the principal amount and does not cover the interest component.

Important Facts for Exams

• FCNR(B) stands for Foreign Currency Non-Resident (Bank) deposits, which are maintained in foreign currency by non-resident Indians.
• External Commercial Borrowings are loans raised by eligible Indian entities from non-resident lenders.
• The 2013 RBI swap facility attracted about USD 26 billion into Indian banks.
• Basis points are used in finance to measure interest rate changes, and 100 basis points equal 1 percentage point.

Historical Context

The present facility is structurally similar to the 2013 RBI swap arrangement. The 2013 measure was used to attract foreign currency deposits and support external sector stability.