RBI Introduces USD-INR Swap Facility for FCNR(B) Deposits

RBI Introduces USD-INR Swap Facility for FCNR(B) Deposits

Pursuant to the announcement made by the Governor on June 5, 2026, the Reserve Bank of India (RBI) has introduced a special USD-INR Forex Swap Facility for eligible FCNR(B) deposits.

The facility is intended to support foreign currency deposit mobilisation by banks and will be available for fresh FCNR(B) deposits raised during the specified window.

Key Features of the Swap Facility

1. Eligible Deposits

• The facility is available for fresh FCNR(B) deposits mobilised in any freely convertible foreign currency.
• Renewed FCNR(B) deposits upon maturity are also eligible.
• The deposits must have a minimum maturity period of 3 years and a maximum maturity period of 5 years.
• Although deposits may be accepted in various eligible foreign currencies, the swap transaction with RBI will be conducted only in US Dollars.

2. Swap Tenor

• The tenor of the swap transaction must match the maturity period of the underlying FCNR(B) deposit.

3. Record Maintenance

• Banks must maintain separate records of FCNR(B) deposits covered under this scheme.
• Adequate documentation and audit trails should be preserved for all related transactions.

4. Interest Rate Flexibility

• Banks may determine deposit pricing according to their internal policies.
• However, pricing must remain within the interest rate ceilings prescribed by RBI from time to time.

5. Conversion of Non-USD Deposits

• For deposits mobilised in eligible foreign currencies other than USD, banks may convert the deposit value into its equivalent USD amount using prevailing market exchange rates on the swap date.
• A consistent methodology should be followed for such conversions.
• Proper documentation of the conversion process must be maintained.

6. Availability of the Facility

• The swap facility will be available on all working days in Mumbai, excluding Saturdays and public holidays.
• Each bank may access the facility only once during a week.
• The maximum amount eligible for swapping during a week will be limited to the total eligible FCNR(B) deposits mobilised during previous week(s) for which the swap facility has not already been utilised.

7. Swap Transaction Structure

Under the arrangement:

• Banks may sell US Dollars to RBI in multiples of USD 1 million.
• Simultaneously, they will enter into an agreement to repurchase the same amount of US Dollars at the end of the swap period.
• The initial sale will be executed at the applicable FBIL Reference Rate.
• Settlement of the first leg of the transaction will occur on a spot basis.
• The reverse leg will be executed at the same exchange rate as the initial transaction.
• The swap will be carried out at par without any swap premium.

8. Declaration Requirement

Banks seeking to avail themselves of the facility must submit a declaration signed by authorised officials confirming that the underlying deposits comply with all scheme requirements.

9. Operational Framework

• The facility will be administered by RBI’s Financial Markets Operations Department (FMOD), Mumbai.
• FMOD may establish a schedule for participating banks to ensure orderly utilisation of the facility while considering prevailing market conditions.

10. Premature Withdrawal Conditions

• Deposits covered under this scheme will be subject to a mandatory lock-in period of one year.
• After completion of one year, banks may permit premature withdrawal in accordance with their internal policies.
• However, swap transactions executed with RBI cannot be cancelled or reversed before maturity.

11. Validity Period

• The facility is effective immediately.
• Eligible FCNR(B) deposits must be mobilised between the date of introduction of the scheme and September 30, 2026.
• Banks may access the swap facility up to October 16, 2026.

12. Applicability of Existing FCNR(B) Rules

• All existing regulatory provisions governing FCNR(B) deposits will continue to apply unless specifically modified under this scheme.
• Certain restrictions contained in Paragraph 402 of the Reserve Bank of India (Commercial Banks – Credit Facilities) Directions, 2025 will not apply to deposits covered by this facility.

13. Application Procedure

Eligible banks may submit requests to RBI’s Financial Markets Operations Department via email, specifying:

• Amount of US Dollars proposed to be swapped;
• Desired swap tenor; and
• Required declaration confirming compliance with the scheme.

14. Documentation Requirements

Banks are not required to execute an ISDA Agreement with RBI for participation in this swap facility.

Quick Summary

Practical Impact

The facility enables banks to mobilise medium-term foreign currency deposits while mitigating exchange rate risk through a direct swap arrangement with RBI. By offering swaps at par and allowing access against eligible FCNR(B) deposits, the scheme is expected to support foreign currency inflows and strengthen banking sector liquidity during the operational period.

Notification

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