Mumbai, June 10, 2026, 20:34 IST
- The RBI rolled out a fresh FCNR(B) window, opening the door for banks to collect foreign-currency deposits from overseas Indians with maturities of three to five years, then swap those dollars directly with the central bank.
- HDFC Bank and State Bank of India have both bumped up their foreign-currency deposit rates, kicking off what’s now an open scramble for NRI funds.
- Now it’s a straightforward test—are these rates sufficient to draw in dollars, or will the RBI be left shouldering excessive currency risk?
Indian banks moved quickly Wednesday, lifting rates on foreign-currency deposits for non-resident Indians after the Reserve Bank of India rolled out a swap window reminiscent of 2013 in a bid to pull in dollars and shore up the rupee. HDFC Bank bumped up its three- to five-year deposit rates by 235 to 265 basis points to hit 6%. State Bank of India wasn’t far behind, hiking rates on similar deposits by as much as 300 basis points. For reference, a basis point equals 0.01 percentage point.
The timing is crucial, with the rupee struggling—off 6% for the year, according to Reuters, and touching fresh lows back in May. That puts it near the bottom of the pack in Asia, second-worst so far in 2026. The RBI’s wider plan? Attract more foreign money, as global risk jitters and India’s own current-account strains push the balance of payments front and center.
The Reserve Bank of India rolled out a U.S. dollar-rupee forex swap facility on June 8, aimed specifically at new FCNR(B) deposits with terms running at least three years and not exceeding five. This window covers eligible deposits gathered from June 8 through September 30, and banks get until October 16 to tap the RBI facility.
FCNR(B) deposits are fixed-term accounts in foreign currency, available to NRIs, Overseas Citizens of India, and Persons of Indian Origin. Here, a swap involves the bank selling dollars to the RBI, with a deal to repurchase them later; the RBI has said both sides of the swap happen at the same rate, eliminating the usual hedging expense that banks face when guarding against currency fluctuations.
This facility isn’t open-ended: banks get a single shot each week. Deposits come with a one-year lock-in, and once a swap is done with the RBI, there’s no cancelling. Lenders can still set their own deposit rates, sticking to the RBI’s current cap.
Ashok Chandra, chief executive at Punjab National Bank, told Reuters the banking industry might pull in $35 billion to $40 billion under the scheme. “It is a win-win situation for non-resident Indians and for the banks,” Chandra said. PNB is setting its own sights on $2.5 billion to $3 billion, planning marketing pushes in the US, Canada, the UK, and the Middle East. Reuters
Banks, hoping to lure NRI money back, are counting on improved pricing. According to Business Standard, FCNR(B) inflows dropped sharply to $946 million in FY26 after $7.08 billion the previous year. Now that the central bank is shouldering the hedge risk, banks have even more incentive to step up the fight for deposits.
This isn’t the first time the scheme has surfaced, and its track record hasn’t always been smooth. Back in 2013, as the rupee slid during the Federal Reserve’s “taper tantrum,” the RBI rolled out a similar FCNR(B) swap window. Raghuram Rajan, who was the RBI Governor then, would later call the idea “completely idiotic” and “terrible,” yet the plan still attracted $26 billion and shored up market sentiment. The Indian Express
Economists at ICICI Securities Primary Dealership, led by A Prasanna, see the potential for a comparable inflow—around $50 billion this time, according to The Indian Express. Their note also put the combined impact of all government and RBI steps at about $100 billion spread over the coming 12 to 24 months.
Short-term Indian government bond yields slipped to a three-month low on Wednesday. The move comes as investors anticipate banks will channel some of their new dollar-linked rupee liquidity into the short end of the curve. Binod Kumar, managing director and CEO of Indian Bank, pointed to the RBI scheme, noting that expectations for banks to allocate part of these funds to shorter bonds are fueling the rally.
Standard Chartered’s Parul Mittal Sinha told Reuters she’s looking for roughly $5 billion in additional inflows in the near term following the announcements. That’s underpinned by tweaks to tax policy and the belief that the rupee could hold up against certain Asian peers.
Still, the plan isn’t airtight. Unless banks put up a rate that clearly beats U.S. dollar alternatives, expect depositors to hold back. A softer rupee or another jump in global rates could also make the RBI’s hedge cost heavier. What really matters: the rates banks actually roll out, how fast they act, and whether non-resident Indians decide it’s worth locking in their money for three to five years.
