Swap facility for ECBs and Overseas Foreign currency borrowings

RBI Launches USD-INR Swap Facility for Eligible ECBs and Overseas Foreign Currency Borrowings

Following the policy announcement made on June 5, 2026, the Reserve Bank of India (RBI) has introduced a dedicated USD-INR Forex Swap Facility for certain External Commercial Borrowings (ECBs) and Overseas Foreign Currency Borrowings (OFCBs).

The measure is intended to facilitate foreign currency funding and provide an avenue for managing exchange rate exposure on eligible borrowings.

Scope of the Facility

The swap arrangement is available for the following categories of borrowings:

1. Eligible External Commercial Borrowings (ECBs)

The facility may be used for ECBs that satisfy the following conditions:

• Average maturity period of at least three years.
• Loan drawdowns occurring from the date of introduction of the scheme up to December 31, 2026.
• Borrowings raised by:
  • Public Sector Undertakings (PSUs) where the Central Government and/or State Government holds majority ownership; or
  • Statutory corporations and entities established under Central or State legislation and controlled by the respective government.

In addition, any undisbursed portion of an already approved ECB may also qualify under the scheme.

However, the facility is not available for:

• ECBs containing embedded options;
• Borrowings undertaken for refinancing existing ECBs; or
• ECBs raised for repayment of earlier foreign currency loans.

2. Eligible Overseas Foreign Currency Borrowings (OFCBs)

Authorised Dealer Category-I (AD Category-I) banks may access the facility for overseas foreign currency borrowings having a minimum maturity period of three years.

Key Features of the Swap Facility

Availability Across Currencies

• Eligible ECBs and OFCBs may be raised in any permitted foreign currency.
• The swap transaction with RBI, however, will be conducted exclusively in US Dollars.

Swap Tenor

• The duration of the swap may align with the repayment schedule or maturity profile of the underlying borrowing.
• The maximum permissible swap period is five years.

Weekly Eligibility Limits

• The facility will be available on all Mumbai working days, excluding Saturdays and public holidays.
• During any particular week, a bank may swap an amount equivalent to the eligible ECB and OFCB inflows received during prior week(s), converted into US Dollar terms.

Swap Structure

Under the arrangement:

• Banks may enter into swap transactions in multiples of USD 1 million.
• The transaction involves selling US Dollars to RBI and simultaneously agreeing to repurchase the same amount upon maturity of the swap.
• The initial exchange will take place at the prevailing FBIL Reference Rate.
• Settlement of the first leg will occur on a spot basis.
• Upon maturity, the bank will repay the rupee funds received along with the applicable swap premium to receive the US Dollars back.

Swap Pricing

• The swap will carry a fixed premium of 1.5% per annum.
• The premium will be calculated on a semi-annual compounding basis.

Declaration Requirement

Banks seeking to utilise the facility must submit a declaration signed by authorised officials confirming that:

• The swap relates to eligible ECB inflows for which hedging has been facilitated; or
• The relevant OFCB proceeds have been received in accordance with the scheme requirements.

Administration of the Facility

• The scheme will be administered by RBI’s Financial Markets Operations Department (FMOD), Mumbai.
• FMOD may prescribe an operational schedule for participating banks, taking into account market conditions and other relevant considerations.

Operational Period

• The scheme is effective immediately from the date of issuance.
• Eligible ECB drawdowns and OFCB receipts must occur on or before December 31, 2026.
• Applications under the swap facility may be submitted up to January 15, 2027.

Regulatory Compliance Requirements

For ECB Borrowers

ECBs raised during the scheme period must continue to comply with the applicable provisions governing external commercial borrowings under the prevailing foreign exchange regulations.

For OFCB Transactions

Borrowings undertaken by AD Category-I banks for participation in this facility must satisfy the requirements prescribed under RBI’s risk management and interbank dealing framework, as amended from time to time.

Application Process

Eligible banks may submit requests to the Financial Markets Operations Department through email, providing:

• Amount of US Dollars proposed to be swapped;
• Desired tenor of the swap arrangement; and
• The prescribed declaration confirming eligibility and compliance.

Documentation Requirement

Participation in this facility does not require execution of an ISDA Agreement with RBI.

Quick Reference Table

Practical Significance

The facility enables eligible borrowers and banks to access foreign currency funding while obtaining a structured mechanism for managing exchange rate risk. By offering a fixed-cost swap arrangement with RBI, the scheme is expected to support overseas borrowing activity, improve hedging efficiency, and facilitate foreign capital inflows into the Indian financial system.

Notification

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