RBI Forex Swap: How India Mobilised $73 Billion Fast

India mobilised about $73 billion in foreign currency in under 11 weeks through the Reserve Bank of India’s special USD-INR swap facility. The biggest contributor was not foreign portfolio investment or FDI. It was FCNR(B) deposits, which accounted for roughly $65.4 billion of the total.

The facility gave banks and eligible borrowers a cheaper way to manage currency risk while bringing longer-term foreign currency into India. By August 21, 2026, the mobilisation had become much larger than India’s comparable 2013 FCNR(B) exercise.

There is an important distinction, though. The headline $73 billion represents gross mobilisation under the facility, not necessarily $73 billion of permanent additions to India’s forex reserves. Some eligible deposits can include renewals, and the swaps create future dollar obligations for the RBI.

What is the RBI forex swap facility?

A forex swap is essentially an agreement to exchange currencies now and reverse the transaction later.

Under the RBI’s 2026 facility, eligible banks could bring foreign currency raised through specified channels and swap those dollars with the RBI for rupees. The RBI received dollars immediately, while banks received rupee liquidity that could be used in India.

The facility covered three main sources of foreign currency:

Source	Mobilised by Aug. 21, 2026	Approx. share
FCNR(B) deposits	$65.397 billion	89.8%
Overseas Foreign Currency Borrowings	$4.860 billion	6.7%
External Commercial Borrowings	$2.591 billion	3.6%
Total	$72.848 billion	100%

The Ministry of Finance subsequently rounded the total to $73 billion.

How did India mobilise $73 billion in just eleven weeks?

The answer comes down to one powerful incentive: the RBI substantially reduced the currency-hedging problem associated with bringing foreign currency into India.

The programme was launched on June 8, 2026. By August 21, reported mobilisation had reached $72.848 billion. The response was strong enough for the FCNR(B) window to be closed on August 31 instead of its originally planned September 30 closing date.

1. FCNR(B) deposits did most of the heavy lifting

FCNR(B), or Foreign Currency Non-Resident (Bank), accounts allow NRIs to hold term deposits with Indian banks in designated foreign currencies.

For an NRI, this means the deposit itself is maintained in foreign currency rather than converted into rupees. For Indian banks, however, raising large amounts of dollar funding normally creates another question: how do you manage the exchange-rate risk when those dollars are deployed in India?

That is where the RBI swap mattered.

Eligible FCNR(B) deposits with maturities of three to five years could be swapped with the RBI. The central bank’s framework effectively removed the principal currency-hedging cost for eligible deposits by providing the principal swap at par.

The result was striking. FCNR(B) deposits accounted for about $65.4 billion, or nearly 90% of total mobilisation.

2. Banks could turn dollars into usable rupee funding

Consider a simplified example.

Suppose an Indian bank raises $100 million through eligible FCNR(B) deposits.

Instead of carrying the full exchange-rate exposure itself, the bank sells those dollars to the RBI under the swap. The RBI provides the corresponding rupees.

At maturity, the transaction reverses. The bank gets the dollars back under the agreed arrangement so that it can meet its foreign-currency obligation.

In simplified form:

NRI deposits dollars → Indian bank receives dollars → bank swaps dollars with RBI → RBI receives dollars → bank receives rupees

The structure made foreign-currency funding much easier for banks to use domestically without taking the same principal exchange-rate risk they otherwise would.

3. The facility also covered overseas bank borrowings

FCNR(B) deposits were not the only source.

Authorised banks could also mobilise funds through Overseas Foreign Currency Borrowings (OFCBs). By August 21, this channel had contributed about $4.86 billion.

The economics were different from the FCNR(B) facility. Eligible OFCB and ECB swaps carried a fixed premium of 1.5% per year, compounded half-yearly, rather than the at-par principal treatment offered for eligible FCNR(B) deposits.

4. Eligible external commercial borrowings added another source

External Commercial Borrowings, or ECBs, are foreign-currency borrowings raised overseas by eligible Indian entities.

Under the special arrangement, eligible public-sector borrowers could access the RBI swap facility for qualifying ECBs. This channel mobilised about $2.59 billion by August 21.

Its contribution was small compared with FCNR(B) deposits, but it broadened the programme beyond NRI deposits and bank borrowing.

Why was the FCNR(B) swap so attractive to banks?

Foreign-currency funding can look cheap until hedging costs are added.

Imagine an Indian bank raises dollars overseas because dollar interest rates appear attractive. If it plans to use the money for rupee lending, it cannot simply ignore what happens to USD-INR over the next three to five years.

If the rupee depreciates substantially, repaying those dollars becomes more expensive in rupee terms.

Banks therefore hedge the currency exposure, but long-term hedges can be costly.

The RBI facility changed that equation.

For eligible FCNR(B) deposits, the RBI took on the principal swap at the same exchange rate for the two legs. This removed a major component of the bank’s hedging cost. Interest-related exposure remained outside the principal swap.

That made qualifying foreign-currency deposits considerably more attractive as a source of funding.

Why did the RBI want more dollar inflows?

India was not facing an empty-reserves situation when the facility was introduced.

Rather, the measure can be understood as a way to strengthen external buffers and attract longer-duration foreign-currency funding during an uncertain global environment.

Unlike short-term portfolio flows, three-to-five-year deposits and longer-term borrowings provide funding with a more predictable maturity profile.

Large dollar inflows can also give the RBI more room to manage periods of pressure in the foreign-exchange market.

That matters because the central bank does not target a fixed USD-INR exchange rate. RBI intervention is generally aimed at maintaining orderly market conditions and limiting excessive volatility rather than defending one particular rupee level. Its previous annual reporting describes intervention in both spot and derivatives markets in those terms.

How does the 2026 facility compare with the 2013 FCNR(B) scheme?

The comparison puts the scale into perspective.

India used an FCNR(B)-linked swap programme during the rupee crisis of 2013. That exercise raised roughly $26 billion through FCNR(B) deposits over about three months.

The 2026 programme reached about $73 billion across FCNR(B), OFCB and ECB channels in under eleven weeks.

Metric	2013 exercise	2026 facility
Approx. mobilisation	$26 billion from FCNR(B)	$72.85 billion across eligible channels
Main funding source	FCNR(B) deposits	FCNR(B) deposits
Approx. period	Around 3 months	Under 11 weeks to Aug. 21
Broader eligible channels	More limited	FCNR(B), OFCB and eligible ECB
Primary mechanism	RBI-supported forex swap	RBI-supported USD-INR swaps

The figures are not perfectly like-for-like because the 2026 total includes multiple funding channels. Even so, the difference in scale is substantial.

Did India’s forex reserves increase by $73 billion?

Not necessarily.

This is the most important qualification to the headline number.

The $72.848 billion figure measures eligible foreign currency mobilised under the programme. It should not automatically be interpreted as a $72.848 billion net increase in RBI reserves.

There are several reasons.

Eligible FCNR(B) deposits can include renewals

A depositor whose existing FCNR(B) deposit matures may renew it into an eligible deposit.

That helps a bank retain longer-term foreign-currency funding, which is economically useful. But a renewed deposit does not necessarily represent a fresh dollar arriving in India from overseas.

Without a breakdown between fresh remittances, renewals and transfers of existing foreign-currency balances, gross mobilisation cannot be treated as identical to fresh net inflows.

A swap has two legs

When the RBI receives dollars today through a swap, it also agrees to return dollars when the transaction reverses.

That means the transaction strengthens current dollar availability but creates a future foreign-currency commitment.

This is different from receiving dollars permanently.

Other forex flows continue at the same time

India’s reserves are affected by many other transactions, including:

• foreign portfolio investment flows
• foreign direct investment
• trade and current-account flows
• RBI intervention in the currency market
• external borrowing and repayment
• valuation changes in currencies and gold

So the net movement in official reserves cannot be calculated simply by adding the programme’s $73 billion headline number.

What does the RBI swap mean for the rupee?

Large dollar mobilisation can be supportive for the rupee, but the relationship is not mechanical.

The facility channels dollars toward the RBI rather than forcing banks to sell large amounts directly into the open spot market. That can help the central bank build or preserve foreign-currency liquidity while avoiding unnecessary disruption in USD-INR trading.

A stronger external buffer can also improve the RBI’s capacity to respond when dollar demand rises sharply.

But the rupee still depends on wider forces, such as:

• crude oil prices
• US interest rates and the dollar
• foreign portfolio flows
• India’s trade deficit
• inflation and interest-rate expectations
• geopolitical risk
• global risk appetite

The swap facility is therefore a stabilisation tool, not a guarantee of rupee appreciation.

What are the benefits of the $73 billion mobilisation?

The programme delivered several potential advantages.

A larger immediate foreign-currency buffer

The RBI receives foreign currency through the near leg of the swaps, improving immediate access to dollars.

Longer-duration funding

Three-to-five-year FCNR(B) deposits are generally more stable than highly liquid portfolio flows that can reverse quickly when global markets turn risk-averse.

Lower hedging costs for banks

The FCNR(B) structure removes a major principal hedging cost, improving the economics of raising foreign-currency deposits.

Diversified sources of external funding

The programme did not rely on a single channel. FCNR(B) deposits dominated, but overseas bank borrowing and eligible ECBs also contributed.

Less dependence on short-term market flows

Foreign portfolio investors can sell Indian assets quickly. Term deposits and longer-maturity borrowings have different liquidity and maturity characteristics, which can make the external funding mix more resilient.

What are the risks and costs?

A successful mobilisation does not make the dollars free money.

RBI has future dollar obligations

Every swap has a reverse leg.

When the swaps mature, the RBI must provide dollars back according to the agreed terms. That future commitment needs to be considered alongside the immediate increase in dollar availability.

Deposits and borrowings eventually mature

FCNR(B) deposits are liabilities of banks, while OFCBs and ECBs are borrowings. These are fundamentally different from permanent capital such as equity investment.

A large concentration of maturities could create future refinancing needs.

Gross mobilisation may overstate fresh inflows

Because eligible FCNR(B) amounts can include renewals, the headline total alone does not show how much completely new foreign currency entered India.

For a fuller assessment, useful disclosures would include fresh deposits versus renewals, net changes in outstanding FCNR(B) deposits, settled swap amounts and the maturity distribution of the RBI’s obligations.

There is an economic cost to providing the hedge

Reducing or absorbing hedging costs makes the facility attractive precisely because somebody is taking the other side of that risk.

For the FCNR(B) principal, that party is the RBI.

The final economic cost therefore cannot be judged only by looking at how many dollars were mobilised. Exchange rates, maturity conditions and the central bank’s forward position matter too.

Why did the RBI close the FCNR(B) window early?

The strong response meant the RBI could bring forward the closing date of the FCNR(B) component from September 30 to August 31, 2026.

By August 21, total mobilisation under the broader facility had already reached about $73 billion, including $65.4 billion through FCNR(B) deposits.

Early closure is significant because the programme was designed as a special policy facility, rather than an open-ended source of subsidised currency hedging.

Once sufficient foreign currency had been mobilised, keeping the concession available for longer would have offered diminishing benefits while potentially increasing the RBI’s future swap exposure.

What the $73 billion figure really tells us

The most remarkable part of the RBI forex swap facility is not simply the size of the headline number.

It is how quickly the programme changed incentives.

By reducing the principal currency-hedging burden for eligible FCNR(B) deposits and providing concessional swap terms for other qualifying foreign borrowings, the RBI made it much more attractive for banks and eligible borrowers to mobilise longer-term foreign currency.

The result was nearly $73 billion in reported mobilisation in under eleven weeks, with FCNR(B) deposits contributing almost nine out of every ten dollars.

But the number needs to be read correctly. These are not $73 billion of free or permanent reserves. Deposits and borrowings mature, swaps reverse, and some FCNR(B) mobilisation may represent renewals rather than completely fresh foreign capital.

The facility strengthened India’s near-term external liquidity. Its longer-term success will depend on what happens when those liabilities and swaps eventually mature.

FAQs

Key takeaways

• India’s special RBI forex swap facility mobilised about $73 billion by August 21, 2026, in under eleven weeks.
• FCNR(B) deposits contributed about $65.4 billion, close to 90% of the total.
• The facility worked by making foreign-currency funding more attractive, particularly by reducing the principal hedging burden on eligible FCNR(B) deposits.
• OFCBs contributed about $4.86 billion and eligible ECBs about $2.59 billion.
• The mobilisation was much larger than the roughly $26 billion raised through the comparable 2013 FCNR(B) exercise.
• The $73 billion figure is gross mobilisation, not necessarily $73 billion of fresh or permanent forex reserves.
• RBI’s swaps create future dollar obligations, so their eventual maturity and reversal matter when judging the programme’s full economic impact.