Nearly 50% of FCNR(B) deposits under RBI swap have five-year tenure: Guv

Nearly half of the Foreign Currency Non-Resident (Bank), or FCNR(B), deposits mobilised under the Reserve Bank of India’s (RBI’s) concessional swap facility were for a five-year tenure, RBI Governor Sanjay Malhotra said in an interview with CNBC-TV18 on Friday.

“Almost 50 per cent, 48.50 per cent or so is five-year, and about 42 per cent is three-year and up to four years, less than four years, and the remaining about 9 per cent or so in the four to five-year window,” Malhotra said.

Domestic banks were offering their highest interest rates on five-year FCNR(B) deposits, with some banks offering rates of more than 7 per cent.

RBI’s latest data said that as of August 31, banks had mobilised $127.2 billion in FCNR(B) deposits under the scheme. The FCNR(B) window closed on August 31, while facilities for external commercial borrowings (ECBs) and overseas foreign currency borrowings (OFCBs) will remain open until December 31, 2026. Banks have so far raised $5.3 billion through OFCBs and $3.9 billion through ECBs.

FCNR(B) mobilisation accelerated sharply in the final week before the deadline, rising from $65.4 billion on August 21 to $127.2 billion, exceeding late market expectations of $90-100 billion. The deposits raised under the scheme have maturities of three to five years, with most inflows coming in the five-year category.

“The flows are certainly very robust. They reflect the strong belief and confidence of the investors worldwide in the extremely strong macroeconomic fundamentals of our country. It demonstrates at the same time that we can get foreign flows, capital flows, in a short period of time. This helps us, in terms of financial stability, external sector resilience. We are quite happy with the result”, said Malhotra in the interview.

Additionally, he highlighted that RBI absorbing the entire hedging cost for the FCNR(B) deposits will “net-net” result in additional revenues, additional income for the central bank.

“Some people are comparing it with the benchmark three-year forward premium. I don't think that's the right way to do it. That's not the right price. Also, because the market there is very thin, very few trades over the course of a year, and for the kind of deposits that we were looking for, I don't think that could have been any premium that we could have got. I think it was fairly priced, and it was important from the perspective of the Indian economy and the external sector resilience that I mentioned”, Malhotra said.

The RBI operationalised the concessional swap facility for fresh FCNR(B) deposits, OFCB and ECB inflows on June 8. The initial deadline for the FCNR(B) window was September 30, 2026, but the central bank brought it forward by a month after receiving a strong response.

ICICI Bank, the country’s second-largest private sector lender, said it had mobilised $17.9 billion in FCNR(B) deposits through the scheme. State Bank of India (SBI), the country’s largest lender, has also exceeded its $10 billion target for FCNR(B) mobilisation. Bank of India has mobilised nearly $2.4 billion, while state-owned Indian Bank has raised $2.3 billion through FCNR(B) deposits. Central Bank has raised over $900 million. RBL Bank has raised $3.4 billion, while IDFC First Bank has raised $3.5 billion, and state-owned Bank of Baroda has raised nearly $8 billion.

The funds are already being deployed in the credit market. Public sector banks have disbursed $52.8 billion in loans through their International Financial Services Centre (IFSC) banking units at GIFT City, against sanctioned loans of $54.02 billion, according to a press release from the International Financial Services Centres Authority (IFSCA).

ECBs disbursed by IFSC banking units totalled $11.62 billion between April and August, while Indian banks raised $11.12 billion through bond issuances on IFSC exchanges during the period, IFSCA said.