RBI's $20B Swap Scheme Draws Strong Capital Inflows, Banks Eye Further Mobilisation

The Reserve Bank of India's concessional swap facility has drawn $20.72 billion in foreign exchange inflows in the five weeks since its launch on June 8, the central bank said Monday, marking a solid start to a programme aimed at strengthening the balance of payments and supporting the rupee.

Of the total mobilised through July 17, Foreign Currency Non-Resident (Bank) — FCNR(B) — deposits contributed $17.4 billion, the largest share. Overseas foreign currency borrowings (OFCBs) brought in $1.97 billion, while external commercial borrowings (ECBs) under the swap facility added $1.34 billion, according to RBI data.

"The swap facility has seen avid interest and attracted steady forex inflows since June 8, 2026," the RBI said in a statement accompanying the data release, its first since the scheme became operational.

The measures were announced on June 5 as part of a broader package to incentivise capital inflows amid sustained pressure on the rupee, which has weakened to record lows this year due to elevated oil prices linked to the West Asia conflict. The rupee closed at 96.45 against the dollar on Monday, down 17 paise, and touched a two-month low of 96.5250 earlier in the session.

Government Targets and Bank-Level Activity

The finance ministry has assigned specific FCNR(B) deposit mobilisation targets to individual state-run banks through September 30, the deadline for the scheme, Business Standard reported, citing sources. The government is aiming to mobilise close to $90 billion from the entire set of measures announced in early June, the report said.

"The Department of Financial Services has given us specific mobilisation targets via FCNR(B) deposits, as it is aiming for inflows above market expectations, and has asked banks to devise strategies to attract higher foreign currency deposits," a senior public sector bank official told Business Standard.

Several state-run lenders have disclosed their targets. Indian Overseas Bank has raised its FCNR(B) mobilisation target to $600-650 million by end-September from an earlier $500 million, Managing Director and CEO Ajay Kumar Srivastava said during the bank's post-earnings call. The bank has so far mobilised $300 million and plans to raise another $350-400 million through OFCBs. Central Bank of India has set a target of $400 million in FCNR(B) deposits.

Punjab National Bank is targeting $2.5 billion in FCNR deposits and has received $425 million so far, MD and CEO Ashok Chandra said. "I believe it will," Chandra said when asked whether the industry can mobilise around $50 billion under the scheme. "Most of the inflows across the industry are likely to come during the latter half of August and September, so I am optimistic that the overall target can be achieved."

Among private lenders, ICICI Bank Executive Director Sandeep Batra said the bank has partnered with various parties to provide leverage and is committed to making the initiative a success. Axis Bank MD and CEO Amitabh Chaudhry said the FCNR-B scheme is drawing strong interest from non-resident Indians (NRIs), with a "meaningful opportunity" to grow its deposit base. Kotak Mahindra Bank's Ashok Vaswani said the lender is seeing strong demand but is still building the funding and partnership ecosystem before scaling up.

RBL Bank has raised $150 million through the scheme, MD and CEO R Subramaniakumar said. Federal Bank MD and CEO KVS Manian said the bank expects a fair share of the market, noting that interest is more focused on the Middle East, Singapore and Hong Kong, while Australia, the US and the UK are less favourable due to tax considerations, as reported by the Economic Times.

Economists See Encouraging Start, Upside Potential

Market participants described the inflows as broadly in line with expectations. "It's almost midway through the period during which this hedge facility is available. The inflows are broadly in line with expectations and the numbers are encouraging," Anubhuti Sahay, head of India economics research at Standard Chartered Bank, told Business Standard, adding that the key will be whether momentum is sustained or accelerates to ensure a "meaningful amount" by end-September.

Gaura Sen Gupta, chief economist at IDFC First Bank, termed the start "very healthy." "Given the pace, there could be upside risk to our estimate of overall FCNR-B inflows of $50 billion due to the scheme," she said, as reported by Mint. "For ECB, we maintain an additional inflow of $20 billion." She added that the comfort from additional capital flows will lead to a mild balance of payments surplus for the current fiscal year and moderate the pace of rupee depreciation.

"We believe the comfort from additional capital flows will lead to a mild BoP surplus for the year and moderate the pace of depreciation in the rupee," Sen Gupta told Reuters. "The RBI will likely use this opportunity to bring down the size of its forward book."

Initial market estimates for total inflows under the scheme have ranged from $25-30 billion (Barclays base case, as reported by Mint) to $50-70 billion, with some expecting as much as $70 billion. Bankers, however, have cautioned that a narrower interest-rate differential compared to 2013 — when a similar scheme drew $26 billion in FCNR(B) deposits — could limit inflows this time.

The FCNR(B) window remains open until September 30, 2026, while the OFCB and ECB facilities are available through December 31. The RBI has exempted deposits mobilised under the scheme from cash reserve ratio and statutory liquidity ratio requirements. Market participants expect the central bank to publish inflow data on a regular basis going forward.